Odisha waives VAT on ATF for international flights

International carriers who opt to operate flights to and from the city airport would enjoy full concession on value added tax (VAT) on aviation turbine fuel (ATF).

The state cabinet today decided to slash VAT on ATF for such carriers to zero from five per cent to boost international air connectivity. However, domestic carriers would have to shell out five per cent VAT on the aviation fuel.

"The Bhubaneswar airport was declared an international airport in 2013. But no international flight has taken off yet. To promote international air operations, we have decided to reduce VAT on ATF to zero," chief secretary G C Pati briefed reporters after the cabinet meeting.

The tax exemption would be provided under Section 17 A of the Odisha Value Added Tax.

Earlier, in December 2013, the state government had slashed VAT from 20 per cent to five per cent to strengthen the aviation sector and attract more international as well as domestic airline operators.

In the past three years, the state has collected Rs 30 crore per annum on an average. This includes the VAT on ATF sold for domestic flights.

Air India is keen to extend its Dubai-Mumbai flights to Bhubaneswar subject to improvement of resources and commercial viability of operations.

Indigo had also assured to extend its Dubai-Mumbai and Bangkok-Kolkata flights to Bhubaneswar provided the state government reduced VAT on ATF from five per cent to zero.

Exemption of VAT on sale of ATF to international flights at Bhubaneswar airport is expected to boost tourism and economic activities of the state.

Other international operators were also keen to run their flights to and from the Bhubaneswar airport. Dubai-based flydubai has proposed to operate a daily flight of Boeing 737-800 with 174 seats- 12 business class and 162 economy class seats. Both flydubai and Air Asia have submitted schedules to run commercial operations from Bhubaneswar. While flydubai will connect Bhubaneswar to Dubai, Air Asia has offered to run flights between Bhubaneswar and Kuala Lumpur.

Apart from flydubai and Air Asia, Air Arabia and SilkAir have also evinced interest to start commercial operations from Bhubaneswar.