The ministry has sought opinion from stakeholders on
reducing state taxes on jet fuel to a uniform 4%, according to a discussion
paper posted on its website
New Delhi: Civil aviation ministry has proposed slashing
state taxes on jet fuel, which may significantly bring down costs for ailing
local airlines that are reeling under a debt load of $20 billion and annual
losses of $2 billion.
The ministry has sought opinion from stakeholders on
reducing state taxes on jet fuel to a uniform 4%, according to a discussion
paper posted on its website.
Different states impose sales tax at varying rates on
aviation turbine fuel, going as high as 30%. High fuel expenses, contributing
nearly half the costs incurred by airlines, has compounded woes for the sector
struggling with intense competition.
“Reduction in the fuel tax would allow the Indian
carriers to become competitive in servicing passengers to their respective hubs
within India and compete with international carriers. This advantage would
allow them to increase their market share,” the paper said.
The ministry has also proposed to abolish service tax on
air tickets, which according to the paper, makes air travel “a luxury rather
than an efficient mode of transport.”
Service tax, including fuel surcharge, is currently Rs. 773 or 10.3% of
the total fare, whichever is lower, for an economy ticket on international
flights.
India has already allowed carriers to import jet fuel
directly and has proposed letting foreign airlines invest in local carriers,
hoping the moves will aid the embattled sector.
Analysts estimate that the move to allow direct imports
could reduce costs by 15 to 20% as airlines would not have to buy fuel from oil
marketing companies, which are mandated to levy various federal and state
taxes.
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