Centre urges states to cut jet fuel tax to 12.5%

INDIA`S AVIATION DREAM

Presentations regarding sales tax cut were made by a senior official of the civil aviation ministry and Air India CMD Raghu Menon in a meeting with the Empowered Committee of State Finance Ministers held in Kerala on Monday.

If agreed to, airlines should be able to save around 5 per cent of their total operating costs. However, the benefit will be higher in certain locations which operate greater air traffic.

 

For instance, a decrease in the sales tax at the Delhi airport, which operates around 25 per cent of the domestic traffic and accounts for 20 per cent of the total fuel offtake by all Indian carriers, would give much more benefits than a non-metro which sees lesser traffic.

The Empowered Committee had sought details about the duty structure on ATF, comprising Customs, excise duty and state sales tax. A final view will be taken soon.

Rajasthan, Andhra Pradesh, Kerala and Maharashtra have already lowered the sales tax on ATF to 4 per cent. The Maharashtra government has, however, kept key air-traffic generating cities Mumbai and Pune out of the ambit of the tax cut. Several carriers like Air India, SpiceJet, GoAir and IndiGo are now planning to refuel their aircraft at Hyderabad and Kochi airports to benefit from lower ATF prices.

ATF prices, which are controlled by the public-sector oil companies, were hiked by around 10 per cent leading to a similar price hike by airlines this month. Currently, ATF accounts for more than 42 per cent of an airline's total costs.