Airlines may not get tax relief on fuel

New Delhi: The sharp fall in crude price might have come as a relief to airlines but could adversely affect one big relief the industry was hoping for — a uniform 4% sales tax on jet fuel, which is much lower than the existing rates.
The aviation ministry has long been requesting the finance ministry to term aviation turbine fuel (ATF) as a declared good so that a uniform sales tax of 4% is levied on it throughout the country. But highly placed government officials said with oil plummeting to a 15-month low now, giving in to this demand may “no longer be warranted”.
“In the past when oil was over $145 a barrel, airlines said they may break even the level of $70. Even if the rupee’s depreciation against the dollar is taken into account, current levels of $55-65 that could fall even further on fears of overall reduction in consumption with the slowdown don’t make a strong case for declaring ATF a declared good. States should take the lead now as a move from our end would be difficult,” said the source.
Moreover, there are legal issues in which amendments to Central VAT and its schedule would be required to do so, something that this government at the fag end of its tenure may be unlikely to do, the official added. However, the finmin may look at providing some relief from custom and excise duties.
Indian airlines are deep in red mainly on account of the fact that ATF prices in India are among the highest in the world because of high base charges and even higher taxes. The problem is compounded as states levy very high sales tax.
30/10/0 Saurabh Sinha/Times of India

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Categories: Indian Aviation- In General Oct 2008