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| Hopes Dashed |
New Delhi, March 3: The budget has failed to provide any substantial relief to the financially crippled aviation sector and has overlooked the tourism industry.
Airlines had expected finance minister P. Chidambaram to offer some relief to the sector by providing “declared goods” status to aviation turbine fuel (ATF) or jet fuel, which constitutes the major operating cost. Jet fuel will attract lower tax if it is treated as a declared good.
Airlines pay between 4 per cent and 25 per cent as taxes on jet fuel. The percentage varies from state to state.
“It’s been a disappointing budget for aviation. There were expectations of relief in ATF and MRO (maintenance, repair and overhaul) taxes and funding support for regional airports. All dashed, except for a minor correction in the duty-free period for import of spares and test equipment for MRO. The aviation sector will continue to struggle till fundamental policy changes in taxation are brought in,” said Amber Dubey, partner and head (aviation), KPMG in India.
The finance minister has proposed to exempt basic customs duty on the import of spare parts and testing equipment for maintainance and repair.
Last year, then finance minister Pranab Mukherjee had waived the customs duty on imported spare parts and testing equipment by MRO units on the condition that the benefit could be enjoyed only if the parts were utilised within three months. Now the condition has been modified to make the waiver applicable for a year. The MRO owners have been demanding sops to make the industry more competitive.
The tourism sector, which was hoping to attain industry and infrastructure status and looking forward to a reduction in taxes, was disappointed. Tour operator associations said they had not been given a place in the budget even though the sector was vital for foreign exchange earnings.
The Indian Association of Tour Operators (IATO) had said tourism should be conferred the status of physical exports industry. “We expected the budget would bring some relief to our mounting woes by reducing the service tax as this is the only one special request we have been making since the last few years. But the successive governments have only ensured that tourism is not given any relief,” IATO president Subhash Goyal said.
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