While the rate for economy travel stays unchanged to keep airfares affordable for mass travellers, the steeper GST on upper classes has triggered concern among airlines and online travel agents. Prior to the Council announcing the new tax regime on Wednesday, two major airlines requested for GST on all classes to be brought to 5%, three government officials confirmed to HT.

Former president of Travel Agents Federation of India (TAFI) Ajay Prakash said the new GST rate has come at a time when the Indian aviation market is going through a “very sensitive phase”.

“Increasing the GST for upper class fliers directly means airfares for all the three classes will shoot up,” he said. “While the government claims to promote Indian aviation by bringing in big aircraft, etc., levying higher GST is only going to discourage individual fliers to book on non-economy classes.”

Jitin Makkar, senior vice president and group head of corporate sector ratings in ICRA Limited, noted the additional levy will be passed on to the consumers.

An airline insider requesting anonymity said that the increase is no revolution but it is enough to make airlines rethink budgets and booking strategies. “Let alone the Air India crash (June 12 disaster that claimed 260 lives) that shook passenger confidence, Indian airlines are facing major troubles due to the ongoing Pakistan airspace closure leading to more flying time and increased airfares. At such a time, it was needed that the sector be allowed to remain untouched,” the official said.

A former airline official echoed similar views, saying, “India has only two major airlines now –– while one is trying to regain passenger trust while facing a loss of ₹5,000 crore due to Pakistan closing its airspace, the other (IndiGo) has just entered into the segment and launched its business product.”

Sheldon Hee, regional vice president, Asia Pacific, International Air Transport Association (IATA) termed the move “disappointing”. IATA is a global trade association of airlines, representing around 300 airlines or about 80% of worldwide air traffic and acts as a global voice of the airlines.

“In many ways, India has been an amazing aviation story with its impressive growth, record aircraft orders, and world class infrastructure. 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,” Hee said.

“This increase runs counter to the efforts of Indian carriers, which have been investing in their premium products to enhance the travel experience on their flights. Tax on non-economy air travel has risen dramatically –– GST is at 18% after yesterday’s announcement, compared to the 8.6% rate in 2017 under the service tax regime.”

Hee also said that for its aviation industry to thrive, India needs to take a whole of government approach in considering broader policy and consider the risks of such policies on dampening demand and undermining profitability in order for its aviation industry to thrive.

“Asia Pacific airlines are forecast to only earn $2.60 per passenger in 2025. Taxing premium travellers, where these customers often make a difference to a route’s viability, is counterproductive,” he added.

Makkar, however, said that the increase 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.

“By keeping rates stable for economy travellers, this measure is likely to ensure continued affordability, thus making air travel more accessible,” he concluded.

Traditionally, Indian festivals have been celebrated at home or in ancestral houses, with families gathering under one roof. Recently, Indian consumers have also been choosing to travel and celebrate festivals with multi-generational family units and friends.

Thomas Cook India and SOTC Travel’s India Holiday Report 2025 highlights this shift in consumer behaviour, with demand for longer festive breaks, higher holiday spends and interest in experiences ranging from heritage and luxury stays to cruises and new destinations.

To tap into this growing festival travel trend, Thomas Cook (India) Limited, an omnichannel travel services company, and its Group Company, SOTC Travel, have introduced a specially curated range of holidays for the upcoming festive season, featuring special group tour departures from Kolkata for Durga Puja and Karnataka for Dussehra, as well as from high-potential markets of Gujarat and Maharashtra. In addition, the companies have also announced special Diwali departures across key pan-India markets.

The companies have also announced a special offer: discounts of up to Rs.10000 per transaction across select holidays via HDFC credit cards.

Festive tourism trends

Longer stays and increased spends: From the traditional 3 days Indians are now extending their stays to 6-12 days (multi-generational families combining school vacations like Dussehra, Durga Puja and Diwali). Young India’s millennials/GenZ and working professionals are embracing extended trips, combining weekends with festival holidays for a 5-6 day break

Favourite destinations:

• Domestic & Indian Subcontinent: Andaman, Kerala, Kashmir, Himachal Pradesh, Rajasthan, Goa, Karnataka, North East, Sri Lanka, Bhutan and Nepal

• International: Thailand, Singapore with Bintan, Malaysia, Sabah, Indonesia, Vietnam, Oman, Australia-New Zealand, Switzerland, France, Finland, Japan, Georgia, Germany, Spain, Austria, Kenya, South Africa, Dubai, Abu Dhabi, Maldives, Mauritius, South Korea

• Visa-Free, Visa-on-arrival and easy-visa destinations in demand: Thailand, Malaysia, Philippines, Sri Lanka, Nepal, Bhutan; Dubai-Abu Dhabi, Indonesia, Maldives

• Spiritual Journeys: Leveraging festive sentiment, Thomas Cook and SOTC have curated spiritual journeys through their Spiritual Journeys & Darshans portfolio – featuring Char Dham, Kashi, Ayodhya, Rameswaram, Tirupati, Amritsar, Varanasi, Prayagraj, Dwarka and Sri Lanka with special themed tours such as ‘Ramayan Anant Yatra’ and ‘Ramayan Trails’
• Premium/affordable luxury travel: Customers are opting for luxury resorts and spas, with destinations like France, Switzerland, Scandinavia, South Korea, Japan, Singapore, Australia, New Zealand, Oman, Morocco, Seychelles
• Cruising: Strong interest for sailings across South East Asia and the Middle East (Costa Cruises, Resorts World Cruises); premium sailings like Disney Cruise Line in Australia and Singapore; domestic (Cordelia)
• Festival regional group tours: The companies are witnessing strong interest in their regional tours: Adhbhut Asia, Alokik Asia, Ashadharon Vietnam, Duronto Dubai O Abu Dhabi, Akorshonio France O Swiss with departures accompanied by regional tour managers; on-tour puja and curated vegetarian meals on select tours

Rajeev Kale, President & Country Head, Holidays, MICE, Visa – Thomas Cook (India) Limited said, “Travel has become non-negotiable and festive tourism serves as a cultural driver. We are witnessing a strong and exciting trend—Indians are no longer staying at home but increasingly choosing to celebrate festivals while travelling. This is reiterated in our India Holiday Report 2025 that also reveals a strong shift—85% of Indians are increasing their travel frequency and budgets, driven by a desire to celebrate culture in immersive, meaningful ways.

Hence, to maximise this opportunity we have launched innovative festive regional groups tours like Adhbhut Asia, Alokik Asia, Ashadharon Vietnam, combining local and authentic experiences to meet the aspirations of India’s new-age travellers.”

S.D. Nandakumar, President & Country Head – Holidays and Corporate Tours, SOTC Travel Limited said, “India’s festive calendar is fast emerging as a travel driver. Families and friends are increasingly using these breaks to create multiple holidays rather than a single long annual holiday. Significantly, this trend is not restricted to customers from metro cities, but also from India’s tier 2 and 3 markets, reflecting a strong, nationwide aspiration to travel. Travellers are also embracing new formats—cruise holidays, boutique and heritage stays, luxury villas and immersive experiences like culinary trails and adventure activities. At SOTC, we have designed our festive portfolio to blend celebration with exploration—curating domestic and international tours that allow Indians to experience their festivals in unique settings, while creating deeper connections and lasting memories.”