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Tuesday , May 8 , 2012
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VAT cut on table to keep planes flying

Ranchi, May 7: The state government is ready to consider a request to reduce VAT on aviation fuel if airlines reciprocate the gesture by increasing services in and out of Ranchi that is now left with only six flights compared to 14 of last year.

At a meeting with representatives of Go Air, Jet Airways and state-owned Air India, chief minister Arjun Munda is understood to have told the airlines to present a plan detailing the number of flights and destinations they would add once the tax on Aviation Turbine Fuel (ATF) was reduced.

The state levies 20 per cent VAT on ATF.

“We have requested the chief minister to reduce VAT on ATF which may give a fillip to the aviation sector. Here, the passenger traffic is sometimes less and sometimes more. The reduction in VAT would act as a cushion for us to manage the ups and downs in the business,” explained a senior airline official who attended today’s meeting held at Project Building.

According to state commercial taxes secretary Alka Tiwary, Jharkhand was among 11 states that charged 20 per cent VAT on ATF. “In 15 other states, VAT is between 20 and 30 per cent. And to boost the sector, states like Chhattisgarh have reduced VAT to only 5 per cent. The same rate is applicable in Maharashtra (barring Mumbai and Pune). In Andhra Pradesh it is 16 per cent,” she told The Telegraph.

Airports Authority of India (AAI) chairman V.K. Agrawal had also advocated a cut in VAT rates to boost the state’s floundering aviation sector while on a visit to Ranchi in February for the signing of an MoU on setting up an airport in the temple town of Deoghar.

Till last year, Ranchi boasted of as many as 14 flights that were operated by five airlines. Now, these numbers have fallen drastically — four airlines operate only six flights (see chart). While Kingfisher has suspended all five of its flights, Air India, Jet Airways and Go Air have pulled out a flight each.

“Let the airlines respond. The state may go for relaxing VAT to boost the sector,” said chief secretary S.K. Choudhary, adding that the airlines had been asked to come up with specific proposals.

Today’s meeting was chaired by Munda. Apart from Choudhary and Tiwary, among the others who represented the government were finance secretary Sukhdev Singh, chief minister’s principal secretary D.K. Tiwary, civil aviation secretary K.K. Khandelwal, a joint secretary from the Union civil aviation ministry and Airport Authority of India (AAI) local director Raju R.K.

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