Such a system, if implemented, would mean that airlines would be forced to either pay for every "stock movement" or having an inventory at places of operations and the latter would result in higher expenses, the executive noted.
Another sticking point is that input tax credit is only available for business class travel and not for economy class travel -- a segment where there are more number of passengers.
Input tax credit allows an entity to deduct the levies paid for the inputs while paying the taxes on the final output. Since GST is applicable for goods as well as services, input tax credit provides a leeway for the entities concerned.
"As input tax credit on inputs is not available for economy class (under the GST), it would result in costs to the airlines," the executive said.
According to executives, GST payments on procurement of goods, import of aircraft, aircraft spares are not available for economy class travel.
With the country's domestic aviation market growing at double digits for more than two years, domestic carriers are looking to attract more passengers and the resultant competitive fares along with rise fuel costs have impacted their overall profitability.
Against this backdrop, executives feel that higher taxes on different fronts could further put pressure on the airline business.
The GST rates have been fixed at 5 and 12 percent for domestic and international tickets, respectively.
News Source- BloombergQuint