Govt may extend tax sops on ATF to local airlines
The government is likely to extend tax concessions to domestic carriers on aviation turbine fuel (ATF), similar to what is enjoyed by foreign airlines.
By Sunny Verma, TNN |
NEW DELHI: Domestic airlines may be treated on par with their foreign competitors when it comes to paying various duties on fuel. The government is likely to extend tax concessions to domestic carriers on aviation turbine fuel (ATF), similar to what is enjoyed by foreign airlines.
They may also enjoy exemptions on excise duty and sales tax on ATF used for international operations. The finance ministry is considering a proposal to exempt sales tax and excise duty on ATF used by domestic airlines for foreign operations, sources said.
While central excise duty on ATF is 8%, sales tax varies between 4% and 39% in various states. If the exemption is granted, ATF costs for international operations may come down substantially, which is the single largest cost element accounting for about 40% of airline firms total cost. The fall in ATF prices may also benefit passengers hopping to foreign shores as they can expect a decline in air fares.
While foreign carriers fuelling their planes in India are exempted from paying taxes on ATF, domestic airlines have to pay taxes on ATF even for their international operations. Domestic airlines have demanded from the finance ministry that their dedicated international operations should be treated on par with ‘physical exports’ of inputs like ATF, which are exempt from payment of any excise duty and sales tax.
The carriers have suggested that they can be given duty exemptions on ATF on the basis of a drawback mechanism. Under such a mechanism, taxes are paid upfront which can later be claimed as a drawback as and when they are used for international operations. The airlines have also asked the government to allow them hedging of ATF, which would enable them manage their costs better.
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Apart from exemption of taxes on ATF, the recently-founded aviation body Federation of Indian Airlines (FIA) has asked the finance ministry to remove service tax on first and business class travel to international destinations. They have argued that removal of service tax on these heads would help them reduce their costs while reducing the ticket prices for international business and first class travellers. FIA plans to lobby with various ministries to ensure a profitable environment for the sector. Although the low fare war in the sector is likely to continue, the industry has joined hands to tide over mounting losses, expected to touch Rs 2,200 crore within a year.
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