Aviation ministry calls for a reduction in VAT on ATFs

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The Ministry of Civil Aviation uses its persuasive skills to convince states to rationalize value added tax (VAT) rates on aviation turbine fuel (ATF) in the range of 1-4% .

Given the financial situation of airlines, the ministry has engaged in a dialogue with states to highlight how streamlining will benefit all stakeholders. According to the ministry, states earn on average only 2,500 to 3,000 crore yen each from VAT, which is minimal when it comes to collecting revenue through other channels, but has a negative impact. on airlines because fuel costs can reach 50 percent. percent of total operating cost.

The ministry argued that initially the revenue may be less, but over time the increase in economic activity will significantly offset the loss.

Making a strong case for streamlining the VAT rate, Civil Aviation Minister Jyotiraditya M Scindia wrote to chief state ministers on the issue. In such a letter seen by Activity area, he argued, “States like Kerala, Andhra Pradesh, Meghalaya, Nagaland, Sikkim and Telangana have lowered VAT to 1% and even below. As a result, they saw a substantial jump in the number of aircraft movements. ”

The letter also highlighted the increase in flights to 23,566 from 21,516 in six months in Kerala. Likewise, after the reduction, Hyderabad saw an increase in the number of flights to 86,842 from 76,954.

“It is not easy. We will continue to go on and try to explain to them why the rationalization of tariffs not only makes sense commercially, but also the revenue streams will be constant and good for states in the long run,” said a senior official.

Excise duty on ATF

ATF supplied to domestic airlines is subject to a central excise tax of 11 percent, while it is 2 percent for scheduled commuter airlines at regional connectivity program airports. ATF sold to foreign airlines and Indian airlines operating in international sectors is exempt from duty.

What further complicates the problem is that VAT rates vary even within a state.

For example, in Tamil Nadu, ATF VAT for Tiruchi Airport is 5%, while it is 29% for all other airports. In Maharashtra, ATF VAT is 25 percent at Mumbai and Pune, but 5 percent at other airports. In Gujarat, the rate is 30% for all airports except Rajkot where it is 5%. In Madhya Pradesh, VAT on ATF for Jabalpur, Gwalior and Khajurao airports is 4 percent, while it is 25 percent for all other airports. In Uttar Pradesh, VAT on ATF for Varanasi and Agra airports is 4%, but 21% for others.

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