The airline industry has strongly criticized the government's decision to raise Goods and Services Tax (GST) on premium flight tickets from 12% to 18%. The higher tax will come into effect from September 22, covering both domestic and international flights offered by Indian and foreign carriers.

Calling the move "disappointing", the International Air Transport Association (IATA) said the hike will hurt demand and profitability in India’s aviation sector.

"Aviation has tremendous potential to contribute to India’s economic growth, directly as Indian airlines expand and indirectly through better connectivity. Increasing GST on non-economy travel without clear justification is therefore disappointing," said Sheldon Hee, IATA's Regional Vice-President for Asia Pacific.

Hee pointed out that this tax component has more than doubled since 2017, rising from 8.6% under the service tax regime to the new rate of 18%.

He warned that the decision runs counter to Indian airlines' efforts to improve their premium products. "Premium travelers often make the difference in a route's viability. Taxing them heavily is counterproductive," he added.

IATA also highlighted the weak profitability of airlines in the Asia-Pacific region, where carriers are forecast to earn just $2.60 per passenger in 2025.

Among Indian carriers, Air India offers premium economy and business class seats on domestic and international routes. IndiGo has also entered the business-class market, offering premium seats on select flights to Mumbai, Bengaluru, Singapore, Bangkok, and Dubai, a network that will expand to 12 routes by the end of 2025.

This is not the first time IATA has raised concerns about India's aviation tax and policy environment. For years, the association has criticized India's high tax burden on aviation, ranging from fuel taxes to airport charges.

IATA has repeatedly warned that such measures make air travel more expensive, discourage demand, and reduce India's competitiveness as an aviation hub.

While India has ambitious plans to become a global aviation leader, IATA has often argued that frequent changes in policy and high taxation work against these goals. The latest GST hike, according to the association, is another example of how short-term revenue measures could hurt long-term industry growth.