Centre may partner states in ATF relief

New Delhi: The Centre is working out a compensation package for states to reduce sales tax on aviation turbine fuel (ATF) to 10% or 15%, which will help domestic carriers like Air India and Jet Airways bring down their operating cost.
The finance ministry is considering compensating states for their revenue loss until jet fuel comes under the VAT regime. As of now, many states levy VAT of more than 20% on jet fuel.
The move may not result in lower fares for passengers as airlines are keen to improve their bottom line. Jet fuel accounts for about 40% of the operating costs of airlines.
“States will suffer a revenue loss if jet fuel is given ‘declared goods’ status, thereby attracting a uniform 4% sales tax across the country. We have hence proposed to levy an intermediate sales tax rate ranging between 10% and 15%. This will serve twin purposes of minimising revenue losses incurred by states and help airlines reduce operating cost,” a civil aviation ministry official told ET.
“The finance ministry may consider compensating the states for their losses for at least the next two years, after which the new VAT regime will replace the existing system,” he added.
29/01/08 Nirbhay Kumar/Economic Times

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Categories: Indian Aviation- In General Jan 2008