A proposal to amend the Central Sales Tax Act to include aviation turbine fuel (ATF) in the list of declared goods is likely to be taken up by the Cabinet on Thursday. The move would bring more relief to the beleaguered airline industry by restricting the power of state governments to levy sales tax on ATF beyond 4%. ET had first reported the governments move to consider a declared goods status for jet fuel.
According to a civil aviation ministry official, the Cabinet is also likely to consider a proposal from the ministry to allow Air India (National Aviation Company of India, or NACIL) to set up joint ventures with SATS of Singapore for ground handling and cargo operations. Four such joint ventures have been proposed, the sources said on the condition of anonymity.
Section 14 of the CST Act has to be amended to include ATF in the list of declared goods, or goods of special importance specified by the government. It is understood that civil aviation minister Praful Patel and the airline industry are in touch with major political parties in the Opposition to drum up support for the amendment.
On Monday, finance minister P Chidambaram said that the government will take up the issue of inclusion of ATF the fuel used by aircraft in the list of declared goods during Parliaments winter session.
ATF supplied to turboprop aircraft is already in the list of declared goods as the NDA government had amended Section 14 of the CST Act to boost regional air connectivity. The UPA government has to delete the qualification that only ATF sold to turboprop aircraft is eligible for declared goods status. While the existing facility benefits only a small section of the aviation industry, the proposed amendment would benefit the entire industry.
Most airlines use jet aircraft like Airbus or Boeing. Even airlines that use small aircraft deploy jet aircraft like Embraer rather than turboprops, which belong to an earlier generation in the aviation industry, said the sources.
Some airlines like Jet Airways and Kingfisher use turboprop aircraft made by ATR of Europe. Inclusion of ATF in the list of goods of special importance has been a long-standing demand of the airline industry since several states impose sales tax on jet fuel in excess of 20%. The demand had gained momentum when spurt in crude oil prices pushed up ATF costs to new highs earlier this year.
ATF prices have declined now following a fall in global crude prices and the government has scrapped import duty on crude oil. Capping sales tax at 4% would be a further boost to the airline industry, which is facing losses to the tune of $2 billion this fiscal.