Airlines to levy VAT on air tickets starting Monday

KATHMANDU: A 13% value-added tax (VAT) will be imposed on flight tickets from Monday – the first day of the new fiscal year 2023/24.

The provision was introduced in the Finance Bill, which was presented in parliament on May 29 and came into effect on May 30. However, the implementation was delayed until the first day of the new fiscal year due to the reluctance of domestic airline companies to go under the VAT regime.

According to the Value Added Tax Act of 1996, VAT must be deposited with tax offices within 30 days of the taxation decision coming into effect.

This marks the first time that the government has imposed VAT on the aviation sector. Previously, the government has so far refrained from imposing VAT on air tickets, recognizing it as a service sector.

Nevertheless, air ticket prices will not immediately increase. Rupesh Josthi, Sales Director at Buddha Air, said the airline companies will begin issuing flight tickets with VAT included from the first day of the new fiscal year. “After holding repeated discussions with officials from the finance ministry and tax offices, we are now prepared to levy VAT on flight tickets. However, flight ticket prices will not go up immediately,” he added.

Currently, airline companies are already collecting fuel surcharges and passenger service charges on flight tickets, which fall within the scope of VAT.

The combined annual turnover of domestic airline companies is approximately worth Rs 15 billion.