Air travel FED not applicable on tickets issued before July 1: FBR

ISLAMABAD: The Federal Board of Revenue (FBR) announced Saturday night that the enhanced rate of the Federal Excise Duty (FED) of Rs 50,000 would not be applicable on Club, Business & First class international air tickets issued before July 1, 2022.

In this connection, the FBR has issued a clarification on the FED applicable on the air travel.

The FBR has issued instructions to the Chief Commissioners and Collectors of Customs in this regard.

FBR has stated that Federal Excise Duty is chargeable on Club, Business & First class international air tickets under Section 3 of the Federal Excise Act, 2005. Furthermore, sub-rule (8) of the rule 41A stipulates that FED is chargeable at the time of issuance of air tickets. Thus, the enhanced rate of FED on air tickets under the new finance bill 2022 will be chargeable only on international tickets(Club, Business & First class) issued on and after 1st July, 2022.

FBR has further clarified that as federal excuse duty is chargeable at the time of issuance of air tickets; therefore, the enhanced rate of federal excise duty at Rs.50,000(previously Rs.10,000) is not applicable on the Club, Business & First class international air tickets already issued before 1st July,2022.

Some tax experts have referred to the Federal Excise Rules after issuance of this FBR clarification.

FED on cigarettes and air travel enhanced

As per the rules, “Excise duty under these rules shall be charged and collected by the airline itself or through its authorized sales or travel agents at the time of issuance of tickets or at the time of chartering of flights:

Provided that if due to some unavoidable reasons excise duty is not collected at the time of issuance of tickets the same shall be charged before boarding of the passenger on the aircraft.”

Federal Excise Rules further said that no airline or person-in-charge of aircraft shall allow any passenger to board the aircraft unless such passenger has paid the excise duty.

These tax experts have challenged the legality of the FBR? new clarification.

Copyright Business Recorder, 2022