A flight ready to take off from Rourkela airport. Telegraph picture
Bhubaneswar, Sept. 5: The state government will bring down the value added tax (VAT) on the aviation turbine fuel (ATF) from the existing 20 per cent to 4 per cent.
The cut, however, will come with a rider. It will be applicable only to the operators of intra-state and international flights. Domestic carriers will not be entitled to the benefit. The move is aimed to boost air connectivity within the state and augment flow of foreign tourists.
The decision follows chief minister Naveen Patnaik’s personal intervention in the matter. He struck down the objections raised by the finance department last month in this regard.
The state government has been trying to push through proposals to encourage airlines to operate flights inside the state.
On March 5, at the inauguration of the new domestic terminal at the city airport, Naveen announced that his government was ready to bring down VAT on the ATF to attract more flights to the state.
On July 12, The Telegraph published a report on how the finance department had turned down a proposal of the civil aviation wing of the general administration department with regard to cutting down VAT on aviation fuel.
On the advice of globally renowned consultants, the finance department had said that barring Chhattisgarh and Jharkhand, where the tax on ATF had been reduced to 5 and 4 per cent, respectively, all other states had higher ATF tax rate. This was because “petroleum products have been considered as a polluting good”. At 16 per cent, Andhra Pradesh has the third lowest tax on the ATF. In Gujarat, the rate is 38 per cent, the highest in the country.
The financial experts had suggested higher tax rate on ATF and argued that lowering of the bar would adversely affect road, rail and water transport sectors.
Sources said the finance department would shortly issue a notification regarding reduction of VAT. Special secretary of the general administration department Niten Chandra said: “The decision has been taken, but a notification from the finance department is awaited.”
Confirming the development, a senior finance department official said: “Flight operators running services within the state and those operating international fights will have to pay VAT at the reduced rate of 4 per cent.”
He said the state government was also working on a seat-guarantee formula to ensure the viability of flights within the state. Under the formula, the government will pay minimum operational cost to an airline if it does not manage to get the required number of passengers for a particular flight. The major destinations that the operators would connect within the state are Jharsuguda, Rourkela and Jeypore.
Joint secretary of the general administration department (who is in charge of the civil aviation wing) Premananda Khuntia said: “Once the notification on VAT reduction on the ATF is issued, we will communicate this to the Union civil aviation ministry as it relates to the policy aspect of the state government.”
Director of Biju Patnaik Airport Sharad Kumar said: “It is a positive development, but reduced VAT should be made applicable to all types of flights arriving or departing from Bhubaneswar.”
“A major national airline such as Jet Airways is going to stop its operations from the city after October 27. If the VAT reduction can be made applicable to all flights, such things will not happen and more operators will like to connect to Bhubaneswar,” said Kumar.
In another development, all formalities are over at the city airport to make it an international airport. The proposal, however, is awaiting the nod of the Union cabinet. An official of the Airports Authority of India said airports in Imphal and Bhubaneswar were likely to get the tag at one go.