Airlines demand lower sales tax on fuel

Bangalore, Feb 8 (UNI) Domestic airlines have urged the finance ministry and state governments to lower taxes on aviation turbine fuel (ATF) for regional jets.

ATF is the single highest cost element for airline companies accounting for over 40 per cent of their total costs.

While the central excise duty on ATF is 8 per cent, the sales tax component varies from state to state between four to 39 per cent.

The newly-formed Federation of Indian Airlines (FIA) has demanded that it be fixed at four per cent for all regional jets that is currently charged for turboprop aircraft.

Even the civil aviation ministry has pitched for reduction of sales tax on fuel used by regional jets. ATF prices are nearly double in India compared to those in other countries.

While turboprops enjoy substantially lower sales tax, operating regional jets which are deployed on similar functions cost higher as the sales tax concession is not available. There is no clear reason for it.

Industry experts say turboprop consume less fuel as compared to regional jets and this could be one of the reasons for existing disparity.

The FIA says correcting this disparity will result in lower input costs for airlines. This will translate into lower fares and better regional connectivity.

UNI