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Slash VAT on jet fuel: Centre to states
September, 11th 2013

The Centre on Tuesday asked state governments to slash value added tax (VAT) on jet fuel to four per cent to provide succour to cash-strapped airline industry, which posted a combined loss of over Rs 9,700 crore and had a total debt burden of Rs 87,779 crore in 2012-13.

It also wanted the states to take steps like reducing property tax on airports, provision of security, power and water supply and road connectivity, to encourage development of air traffic in Tier-II and III cities and far-flung areas.

At a day-long conference of State Civil Aviation Ministers here, representatives of state governments wanted the Centre to share the cost of developing airports in Tier-II and III cities and ensure a minimum number of flights to non- metro and remote destinations, among other things.

Observing that the prime reason for airline losses was high fuel cost which constituted almost 40-50 per cent of an airline's total costs, Civil Aviation Minister Ajit Singh said the aviation turbine fuel (ATF) prices were high due to rising base price and "very high VAT imposed by state governments", which currently ranged from 4 to 30 per cent.

In 2012-13, the airlines posted a combined loss of Rs 9,779 crore and had a total debt of Rs 87,779 crore, official figures showed.

Addressing the conference, he said states like Madhya Pradesh, Chhattisgarh, Jharkhand West Bengal have recently reduced VAT, "I thank them and hope others would also oblige".

Lowering of VAT on ATF by Chhattisgarh has led to "a six -fold increase in ATF uplift" and brought in more flights to Raipur. "So my request to you all will be that you should take up with your government to reduce VAT on ATF to four per cent" which would also lead more people to take to air travel and provide considerable spinoffs to the economy, Singh said.

A "flawed perception" that aviation belonged to the elite only, has resulted in the sector "bearing the cross of high tax regimes and eliciting less sympathy from policy makers," he said.

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