Indian states could lose sales tax revenues totalling Rs 3,000 crore if the central government’s proposal to allow airlines to directly import jet fuel is implemented, a report in Hindu Business Line said.
Don’t expect states to take this loss lying down. The rate of sales tax on jet fuel varies across different states — between 4 percent and 30 percent. To compensate for this loss in revenues, some states like Karnataka and Andhra Pradesh might introduce an “entry” tax, an HSBC report said recently.
Ministers are expected to meet this month or early next month to discuss the consequences of the loss in sales tax.
We’ve already said that direct fuel imports are easier said than done.
The infrastructure to import and transfer fuel across the country is the biggest problem for airlines. The companies that do have the infrastructure are the oil marketing companies.
It remains to be seen how willing oil marketing companies will be to help airlines import their own fuel, because it will, after all, affect the business of oil marketing companies themselves, who are currently the main suppliers of jet fuel to airlines.
10/02/12 Rajanya Bose/First Post
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