Ajit Singh in New Delhi on Tuesday. (PTI)
New Delhi, Sept. 10: The government has asked states to reduce value added tax (VAT) on aviation turbine fuel (ATF) to ease the burden on airlines, who are deep in the red.
Civil aviation minister Ajit Singh today asked states to cut VAT on jet fuel to 4 per cent.
At present, VAT ranges from 4 per cent to 30 per cent across states.
Jet fuel prices were hiked 6.9 per cent with effect from September 1, the fourth increase since June. For airlines, ATF constitutes over 40 per cent of the operating costs.
According to official figures in 2012-13, airlines posted a combined loss of Rs 9,779 crore and had a total debt of Rs 87,779 crore.
The civil aviation ministry has repeatedly asked states to slash taxes to promote aviation in their areas, but only a few have done so. Singh said certain states such as Chhattisgarh, Jharkhand, Madhya Pradesh and Bengal have recently reduced VAT and hoped the others would follow the move.
Analysts said states had started reducing VAT on jet fuel to encourage airlines to fly into their states and use it as a hub.
The civil aviation minister said lowering of VAT in Chhattisgarh had led to a six-fold increase in ATF uplift in the state and brought in more flights to Raipur.
“So my request to you all will be that you should take up with your government to reduce VAT on ATF to 4 per cent,” he told state civil aviation ministers at a conference held here today.
Civil aviation ministry joint secretary Asok Kumar said the states earned only 0.5 to 2 per cent of their total revenue from VAT on jet fuel.
“Though the reduction of VAT on ATF to 4 per cent does not amount to a significant loss of revenue to the states, it makes a major impact on the operating costs of airlines and, therefore, on air fares,” he said.
Over the base price fixed by oil marketing companies, excise duty worth 8 per cent, education cess of 3 per cent and VAT ranging from 0-30 per cent were added, he said.
Kumar said ATF prices in India were 50-60 per cent more than the competing neighbouring hubs. ATF per kilolitre costs Rs 49,496 in Bangkok, Rs 48,010 in Singapore, Rs 45,450 in Kuwait, while in Chennai it is as high as Rs 76, 312.