6 major airports collect 85% of total sales tax on ATF

Over 85 per cent of the total tax from sale of aviation turbine fuel (ATF) by states is earned by six major airports in the country. Over 80 airports share the rest 15 per cent of the collection.

Of the Rs 2,500 crore collected as sales tax annually, airports in Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and Chennai earn Rs 2,184 crore. Delhi, which charges 20 per cent sales tax on jet fuel earns the highest, followed by Mumbai, which charges 25 per cent. Kolkata, at 25 per cent sales tax, is the lowest among the six states.

A senior civil aviation ministry official, requesting anonymity, said only a few states with major airports, earn substantial amount of money and the rest do not earn much. “The states want the Centre to compensate for rationalising sales tax on fuel. The states, with less sales tax earnings, should reduce taxes and that would give a boost to aviation in their respective states,” he said.

The average sales tax in India is the second highest in the world at 24 per cent, second only to Bangladesh at 27 per cent. The airlines have always complained of high sales tax on ATF being one of the reasons for the high cost in the aviation sector.

Of the total operation cost of an airline, fuel costs account for 50 per cent, an increase from 40 per cent in 12 months. Jet fuel prices have increased by 40 per cent in recent times.

An airline executive said there was no alternative to rising fuel prices. “The only way to bring down fuel cost is by paying bills on time that attracts a discount of 15 per cent,” said an executive of a low-cost carrier.

Analysts feel it is high time the government took a decision and the sector should not be taxed. “India being such a large economy, can take a hit of Rs 2,500 crore and the Centre should take a call on taxing ATF not beyond four per cent. The aviation sector should also sensitise the governments on the support the industry can provide to the economy,” said Kapil Kaul, chief executive officer, Indian subcontinent & West Asia, Centre for Asia Pacific Aviation.