Business Standard

Centre asks states to cut jet fuel tax

Currently, VAT on jet fuel ranges from 4-30%

BS Reporter New Delhi
The Centre on Tuesday asked state governments to reduce value added tax (VAT) on aviation turbine fuel to four per cent, to support the cash-strapped airline industry.

It also wanted the states to take steps such as reducing property tax on airports, provision of security, power and water supply and road connectivity, to encourage development of air traffic in tier-II and tier-III cities and remote areas.

Representatives of state governments wanted the Centre to share the cost of developing airports in tier-II and tier-III cities and ensure a minimum number of flights to non-metro and remote destinations, among other things.

Civil Aviation Minister Ajit Singh said a major reason for airlines losses is the high cost of aviation turbine fuel (ATF). Jet fuel prices are high due to rising base price and “very high VAT imposed by state governments”, which currently range from four to 30 per cent.

Chhattisgarh’s lowering of VAT on ATF has led to a “six-fold increase in ATF uplift” and brought in more flights to Raipur. “So, my request to you all will be that you should take up with your government to reduce VAT on ATF to four per cent,” Singh added. This could also lead more people to take to air travel and provide considerable spin-offs to the economy.

On airport development in tier-II and tier-III cities, Singh said the government has decided to operate, manage and develop 20 airports across the country, including Chennai and Kolkata, through public-private partnership. While the requests for qualification (RFQs) for Chennai and Lucknow have already been issued, RFQs for Kolkata, Jaipur, Ahmedabad and Guwahati are in the process and will be out this week, Singh said.

Andaman & Nicobar Island's Lt Governor A K Singh asked the Centre to ensure more flights to the islands, saying despite zero VAT on jet fuel, one-way air ticket prices in peak seasons went over Rs 25,000.

The governments of Kerala and Karnataka urged the Centre to share the costs of developing airports, with the former also asking airlines to assure that reduction in VAT would lead to a decline in airfares. Officials from states such as West Bengal and some north-eastern states sought night-landing facilities, while the Jharkhand government suggested waiving night-parking for non-scheduled operators. The representative of Uttar Pradesh government wanted the Centre to make flying rules more realistic and user-friendly.

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First Published: Sep 11 2013 | 12:33 AM IST

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