The Goods and Services Tax (GST) Council has raised GST on premium air travel—including premium economy, business, and first class—from 12% to 18%.
This means tickets in these classes will become more expensive. GST on economy class tickets will remain 5%, keeping travel affordable for regular passengers.
When Will the New Rates Apply?
The new GST rates will take effect from 22 September 2025.
If you book and pay before 22 September, the old 12% GST will apply, even if your travel date is later.
If you book after 22 September, you will have to pay 18% GST.
Airlines’ Concerns
Airlines and travel agents are worried about the increase. They say the Indian aviation market is already in a sensitive phase.
Ajay Prakash, former president of the Travel Agents Federation of India (TAFI), said:
“Increasing GST for higher class passengers will directly increase airfares across all classes. While the government aims to boost aviation with bigger aircraft, higher GST may discourage people from booking above economy class.”
Jitin Makkar, senior vice president at ICRA Ltd, added that this additional tax will be passed on to consumers.
Aviation Industry’s Response
The International Air Transport Association (IATA) called the decision “disappointing.” Sheldon He, IATA’s Asia Pacific Regional Vice President, explained:
The tax on premium travel was 8.6% in 2017 and has now risen to 18%.
This increase is against the efforts of Indian carriers who are investing in better travel experiences in premium classes.
IATA represents about 300 airlines, covering nearly 80% of global air traffic.
He added that taxing premium passengers is harmful because these travelers often bring extra profits on specific routes.
IATA estimates that in 2025, Asia-Pacific airlines will earn only $2.60 per passenger, making higher taxes on premium travel a negative move.
An airline insider, who wished to remain anonymous, said the increase is not revolutionary, but it forces airlines to rethink budgets and booking strategies.
A former airline official shared similar views:
India now has two major airlines in the premium segment:
Air India, trying to regain passenger trust but losing ₹5,000 crore due to Pakistan closing its airspace.
IndiGo, which recently entered the premium segment and launched its business class product.