Centre to meet states on less tax in jet fuel

Union Civil Aviation Minister Ashok Gajapathi Raju will be asking state governments to prune value added tax (VAT) on aviation turbine fuel (ATF).

He has called a meeting here next week of civil aviation ministers across the country. This will also be the final consultation with state representatives before the draft aviation policy is taken to the cabinet, in the last week of January.

A senior ministry official told Business Standard that at the meeting, another attempt will be made to convince states on the need to cut VAT on ATF, presently varying from four to over 30 per cent. The Centre will make an attempt to explain the multiplier effect of a vibrant aviation sector to the economies of states.

 

"Even after repeated requests, only a few states have reduced the tax. We want to talk to them directly, showcasing how the states which have reduced tax have reaped benefits from increased aviation activity in those airports," the official said.

Fuel costs are currently half the operational expenses of an airline in India. Raju recently said the ministry had written to the states on the VAT issue. "One should not tax an economic activity," he said. The price of jet fuel was recently reduced by 10 per cent, to its lowest level in five years.

The meeting was earlier scheduled for January 4 but got cancelled.

Officials say the meeting comes in the wake of the decision to keep petroleum products out of the ambit of the proposed national goods and services tax.