Scindia urges 22 states to reduce VAT on ATF to 1-4% to boost air travel

Civil Aviation Minister Jyotiraditya Scindia has urged 22 states and Union territories (UTs) to reduce value-added tax on ATF and bring it within the range of one to four per cent across all airports

Civil Aviation Minister Jyotiraditya Scindia has urged 22 states and Union territories (UTs) to reduce value-added tax (VAT) on aviation turbine fuel (ATF) and bring it within the range of one to four per cent across all airports in order to give an impetus to air travel, the Ministry of Civil Aviation said on Wednesday.

"The price of ATF is a major component of the operating cost of airlines. With that, the tax on ATF contributes significantly to the ATF price," according to a statement issued by the ministry.

Presently, there is a huge disparity between states and even within the states in terms of the VAT being levied on ATF, the ministry mentioned.

In a letter to the 22 states and Union territories, Scindia has "emphasised on the need to reduce the existing VAT/sales tax on ATF to 1-4 per cent at all airports with immediate effect".

The aviation industry has been significantly hit due to the travel restrictions imposed to curb the spread of the coronavirus within and outside India.

The revenue collected by the states on account of VAT on ATF is an insignificant proportion of the overall state finances, the ministry noted.

"In any case, this will be more than offset by the positive impact of the air connectivity to the state through the flow of economic activities," it added.

Citing the examples of Kerala, Andhra Pradesh, Meghalaya, Nagaland, Sikkim and Telangana, Scindia said these states have brought down the VAT on ATF to one per cent and even below.

"As a result, they have seen a substantial jump in the number of aircraft movements in their states," according to the ministry.

For example, the Kerala government has brought down the VAT on ATF from 25 per cent to one per cent, it mentioned.

"Subsequently, the number of aircraft movements at Thiruvananthapuram airport increased from 21,516 flights to 23,566 flights in a span of six months i.e an increase of 2,050 aircraft movements post reduction of VAT," the ministry said.

Similarly, the Hyderabad airport saw a rise in the number of flights from 76,954 to 86,842 in a span of six months after the reduction of VAT on ATF from 16 per cent to one per cent, it stated.

"Many other states such as Andhra Pradesh, Chhattisgarh, Nagaland, Odisha, Punjab and Sikkim have followed suit," it added.

The 22 states and Union territories to which Scindia has written the letter are -- Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Madhya Pradesh, Mizoram, Rajasthan, Tamil Nadu, Tripura, Uttarakhand, Uttar Pradesh, Jammu and Kashmir, Delhi, Ladakh, the Andaman and Nicobar Islands, and Dadra and Nagar Haveli and Daman and Diu.