In a boost for regional air connectivity scheme, the government will provide service tax exemption for viability gap funding extended to participating airlines.
The exemption would be in place for one year.
To connect unserved and under-served airports, the Civil Aviation Ministry has come out with RCS (Regional Connectivity Scheme), also known as UDAN ('Ude Desh Ka Aam Naagrik').
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Among other incentives, the scheme provides for Viability Gap Funding (VGF) -- that would be shared by the Centre and states concerned -- for the participating airline operators.
Now, the Union Budget 2017-18, presented by Finance Minister Arun Jaitley today, said 14 per cent service tax would not be levied on VGF provided to airlines under the RCS.
"... Exemption from service tax is being provided in respect of the amount of VGF payable to the selected airline operator" under the RCS, the Budget said.
VGF is to be extended to the airlines concerned for a limited period to facilitate regional air connectivity to unserved and under-served areas.
Meanwhile, in his Budget speech, Jaitley said select airports in tier 2 cities would be taken up for operation and maintenance in public private partnership mode.
Besides, Airport Authority of India (AAI) Act would be amended to enable effective monetisation of land assets.
"Resources, so raised, will be utilised for airport upgradation," the minister said.
This would be for "the services of transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a RCS airport, for a period of one year from the date of commencement of operations of the RCS airport as notified by Ministry of Civil Aviation," the Budget said.
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