UAE - Passengers travelling on international flights from Pakistan will have to pay more, as the government imposes federal excise duty (FED) on first and business class categories, according to travel agents.

Passengers who book first and business class tickets are to pay a fixed amount of FED ranging from Rs75,000 (Dh1,05.5) to Rs250,000 (Dh3,505) of different tiers, as per the International Air Transport Association (Iata).

The duties have been levied as part of the Finance (Supplementary) Bill 2023 to raise Rs170 billion in additional tax revenue in order to unlock $1.1 billion from the International Monetary Fund.

"Yes, the government has imposed a FED on first and business class tickets for international passengers as the National Assembly passed the Finance (Supplementary) Bill 2023 on Monday," Faisal Awan, CEO of Al Ghazi Travel and Tourism, told Khaleej Times.

He said the FED is not applicable to customers travelling on economy class fares.

Pay more for first, business class

When contacted, a spokesperson for Pakistan International Airlines (PIA) confirmed the new levy and said it will be applied once the President of Pakistan Dr Arif Alvi signs the Finance (Supplementary) Bill 2023.

"A fix amount of Rs250,000 (Dh3,505) will be collected from the first and business class passengers travelling to Canada, South America and North America, while the passengers going to Europe, Australia, New Zealand, Pacific Islands and Far East will be paying Rs150,000 (Dh2103) in FED," Abdullah Khan, PIA spokesman told Khaleej Times.

He said the first and business class ticket holders for Middle East and Africa will pay only Rs75,000 (Dh1,05.5) once the new levy is imposed.

"FED will be charged on tickets booked in Pakistan. Passengers who will purchase tickets from outside the country will not pay the new levy," Khan said.

A cosmetic move

Only 10 per cent to 15 per cent of the total passenger volume on international flights fall in first and business class categories, according to travel agent estimates.

"I don't think the government will be able to collect a huge amount through this move as the passengers travelling with families will not be able to afford first and business class anymore," according to a travel agent.

"How much the government estimates it will earn through FED, or how many passengers will slip down to the economy to avoid the new levy will be made evident in the months to come," he said.

Industry experts say the move may cause a dent in revenues of PIA and other international airlines, as they offer first and business class facilities to international passengers from Pakistan.


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Muzaffar Rizvi