‘Lower tax on aviation fuel needs political consensus’

New Delhi: In what could be good news for the domestic airline industry, the Finance Ministry has said that it is open to the idea of amending the Central Sales Tax Act to make Aviation Turbine Fuel (ATF) cheaper.
The amendment will ensure that airlines pay a standard 4 per cent sales tax on ATF throughout the country instead of the State-specific tax that they currently pay. This move will give ATF a ‘Declared Goods’ status.
“I have told the Minister for Civil Aviation that if he can marshal support for the Bill in Parliament, we can introduce the Amendment in the Central Sales Tax Act,” the Finance Minister, Mr P. Chidambaram, said at the Economic Editors’ Conference here on Monday. Political support for the move is crucial as this is a money Bill and is considered a confidence vote for the ruling party.
Sources told Business Line that the main Opposition party, the Bharatiya Janata Party, is likely to support the move; the Left Parties may not.
Another issue the Government will have to tackle while amending the Act is how to compensate the States for a combined revenue loss of about Rs 3,500 crore. The States annually collect sales tax from airlines on ATF.
The airline industry has often complained that since the duty on ATF is fixed on an ad-valorem basis, the States are making a windfall.
The Finance Minister also said that the Government might not have to issue more bonds to the State-owned oil retailing companies in the current financial year, if crude prices stabilise at the current level.
24/11/08 Business Line

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Categories: Indian Aviation- In General Nov 2008