Aviation stakeholders' ask for airport tax to be exempted from GST

PETALING JAYA: Aviation stakeholders are in talks with the Ministry of Finance to exempt passenger service charges (PSC) from being taxed under the Goods and Service Tax regime, a move which could dampen the government's move to encourage increased domestic travel through competitive domestic fares announced during the revised Budget 2015 announcement, Tuesday.
It is understood that while the proposal has been put forward, MoF is yet to respond to the request.
Under the GST regime, both domestic passenger service charges (PSC), or airport tax as it is popularly known, and domestic air fares will be taxed at a rate of 6%.
International flights air fares have been zero-rated. GST however, will be imposed on PSC charges for international flights.
Currently PSC charges for all domestic destinations out of Kuala Lumpur International Airport (KLIA) main terminal is RM9, while those out of klia2 and T2 Kota Kinabalu is at RM6. PSC charges for international flights out of KLIA main terminal currently stand at RM65, while those out of klia2 and T2 Kota Kinabalu is at RM32.
The implementation of GST of PSC would bring the charges up to RM9.54 for KLIA and RM6.36 for klia2 and T2 Kota Kinabalu for domestic flights. While international PSC charges for flights out of KLIA will go up to RM68.90 for KLIA and RM33.92 for klia2 and T2 Kota Kinabalu.
A check on a local airline's website however did not reflect additional charges for airport tax for domestic flights post April.
The government maintained international PSC charges despite a review which would have seen it raised to RM35 for klia2 and T2 Kota Kinabalu and RM71 for KLIA in February last year.
According to MAHB managing director Datuk Badlisham Ghazali, there has been no indication from the government on whether they plan to implement the new charges.
A new operating agreement between the government and MAHB signed in 2009 outlines that the government has to cover any shortfall in PSC charges, should it decide to maintain charges even after a review is due.
In April last year, it was reported that the government has to fork out some RM70 million to cover the shortfall.