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Move to rationalise taxes on aviation fuel

Rumi Dutta

The civil aviation ministry has initiated talks with the state governments to rationalise taxes on aviation turbine fuel.

Sales tax levied by various state governments range between 20 per cent and 35 per cent which results in high aviation turbine fuel prices in the domestic market against the global rates.

The average price of aviation turbine fuel is Rs 20,000 per kilolitre against the international price of Rs 11,000 per kilolitre.

The skewed tax structure has been a major cause of concern for the domestic airlines who have to shell out more for aviation turbine fuel in the local market.

Senior officials in the civil aviation ministry told Business Standard: "We are in talks with the different state governments to rationalise the tax structure.

"However, Andhra Pradesh Chief Minister Chandrababu Naidu has already agreed to slash sales tax on aviation turbine fuel to 4 per cent." Earlier, aviation turbine fuel in Andhra Pradesh attracted 30.55 per cent sales tax.

Besides sales tax, aviation turbine fuel also attracts customs duty of 39 per cent.

The national carriers, Air-India and Indian Airlines, recently urged the government for rationalisation of taxes on aviation turbine fuel, as high charges on fuels was making a dent in their bottomline.

Industry sources say, "IA's fuel charges account for around 30 per cent of the total operating expenditure of the airline while A-I pays around Rs 1 billion as sales tax on its fuel uploading from India which amounts to 8-10 per cent of its total fuel charges".

Sources claimed the local airline companies operating on the domestic routes are at a competitive disadvantage compared with the international airlines.

"Air-India and Indian Airlines pay high domestic rates for aviation turbine fuel within India.

"However, it can buy fuel at international prices for flying on international routes. In fact, Air-India, to avail the cheaper international rates does an "economic tankering" wherein it buys 58 per cent of its aviation turbine fuel requirement from abroad and only loads 42 per cent from India", they point out.

Maharashtra, Karnataka and West Bengal levy a sales tax of 25 per cent on aviation turbine fuel, while Goa and Delhi impose a tax of 20 per cent and Tamil Nadu 24 per cent.

Aviation turbine fuel bought in Kerala attracts the highest sales tax of 35 per cent besides a surcharge of 15 per cent while in Gujarat ATF attracts 30 per cent as sales tax with 20 per cent as surcharge.

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