GST 2.0 set to reshape flight fares: Will you pay more or less for your next domestic flight?

Flight travellers will need to pay higher GST on premium, business, and first-class tickets starting September 22, making these fares more expensive.

Last week, the GST Council announced a simplified two-tier rate structure of 5% and 18%, aimed at reducing prices for a wide range of products and services, especially common-use items.

In the airline sector, the GST on non-economy class tickets has been increased from 12% to 18%. This new rate, applicable with Input Tax Credit (ITC), will come into effect from September 22.

"... if travel is by economy class, then the rate of GST is 5%; otherwise, the GST rate will be 18%," the government said on September 3.

However, the GST on economy class tickets remains unchanged at 5%.

Hence, to save taxes, a traveller should book a business class flight early. For a flight on October 2, 2025, booking by September 14 attracts just 12% GST, but waiting until September 22 hikes the GST to 18%, increasing the cost significantly.

Amid the rising air traffic and travellers seeking a better flying experience, airlines are also looking to expand their premium offerings. In recent years, there has also been good traction for premium economy class seats.

Various experts said that the higher GST for premium air tickets might push more travellers to opt for economy class travel.

Karan Agarwal, Director at travel firm Cox & Kings, said the higher GST on premium airfares may shift some demand towards economy cabins, but it also opens room for operators to rethink value-driven premium offerings.

"For the industry, this is not just about price correction; it's about recalibrating experiences, reimagining itineraries, and ensuring that travel remains aspirational yet accessible," he said in a statement.

Jitin Makkar, Senior Vice President and Group Head of Corporate Sector Ratings at rating agency ICRA, said in a statement that the increase in GST rate should not have a significant impact on the business class segment, considering this segment's low price elasticity, though there could be some amount of downtrading to the economy segment.

"Aviation has tremendous potential to contribute to India's economic growth, both directly as Indian airlines grow and indirectly through increased connectivity for travellers and businesses alike. It is therefore disappointing to hear of a decision to increase the GST on non-economy travel with no clear justification," said Sheldon Hee, Regional Vice President for Asia Pacific at global airlines' grouping IATA.

India is the world's third-largest aviation market, and the passenger traffic is expected to double to 500 million by 2030, according to the government.