Domestic airline companies may be left with no choice but to increase air fares going ahead, as the rollout of the Goods and Services tax (GST) from 1 July is likely to push up cost of operations.

The government will levy tax on any import of spare components by airline companies under GST, which is not taxable under the current regime. Similarly, aircraft lease rentals will also attract GST, The Economic Times report said.

“Under GST, airlines will be taxed for importing spares for their use and on aircraft lease rentals, and these are not being taxed in the current regime. Any new tax on the aviation industry, which operates under thin margins, may drive fares higher,” The ET report said quoting a senior airline executive.