July 17,2023: The government has decided to impose a value-added tax (VAT) on air tickets starting from the fiscal year 2023/24. This decision will result in a 6% price hike for air travelers.
All companies associated with the Airline Operators Association of Nepal have begun the process of registering themselves for VAT in compliance with the government’s directive. Previously, air tickets were exempt from VAT, and therefore, companies were not obligated to register for it. However, the new regulation mandates that all companies must now be registered for VAT.
The government currently levies a 13% VAT on goods and services. With the implementation of VAT on air tickets, prices are set to increase by only 6%, according to Sudarshan Barteula, spokesperson for Yeti Airlines.
Barteula believes that the price hike will not have a significant impact on travelers, as companies will be able to reclaim the VAT paid on aviation fuel, office supplies, and equipment. This measure is expected to mitigate the overall financial burden on the airlines and, subsequently, the customers.
Nevertheless, there remains some uncertainty regarding the application of VAT on international tickets. Travel agents express concerns that imposing VAT on international flights could drive away their business, as customers might opt to purchase tickets from foreign agents instead.
As the government proceeds with the implementation of VAT on air tickets, stakeholders in the aviation industry and travel agents hope for further clarity on the issue of international ticket taxation to ensure the sustainability of their businesses.