India’s civil aviation industry is hoping that the government will cut taxes on jet fuel in the forthcoming Union budget to propel a recovery of the sector hit hard by the pandemic.
Among its key expectations are a cut in taxes on aviation turbine fuel (ATF), which make up 25%-40% of an airline’s operating cost, and other incentives. Currently, some state governments levy as high as 25%-30% value added tax (VAT) on ATF.
Rating agency Icra Ltd said the civil aviation industry expects financial aid from the government and reduction in levies and taxes in the immediate near term to revitalize operations and boost passenger traffic. These include lowering of taxes on ATF and reducing airport charges, parking, and landing along with navigation charges among others, Icra said in a report titled Expectations: Union Budget 2022-23.
To be sure, the aviation sector has been seeking most of these relief measures, including cuts in duty and VAT on ATF, lowering of airport and air navigation charges, inclusion of ATF under the goods and service tax (GST) regime, and reduction of minimum alternate tax for aviation and airport sector for the last few years, especially in the aftermath of the covid-19 pandemic.
While most of these wishes remained unfulfilled, the government announced tax incentives for aircraft leasing and financing from the International Financial Services Centre in Gujarat’s GIFT City in the last budget.
Icra expects the upcoming Union budget to reiterate focus on improving connectivity through the Regional Connectivity Scheme (RCS).
“The budget is also likely to focus on setting up new airports and expanding the existing airport capacities at some key airports to help address the current airport infrastructure constraints faced by the airlines and to improve connectivity with the underserved/unserved airports to boost tourism,” Icra said in its report.
Airline officials, however, argue that the government should do more to aid the sector that has been largely loss-making due to the continuing high-cost structure.
Source: Civil Aviation Authority – Qatar