Airlines’ hopes dashed: states rule out cut in ATF tax

India's states are not going to give the country's troubled airline industry the cut in fuel tax that it has been desperately seeking. At a meeting in New Delhi on Saturday, an 'empowered group' of state finance ministers refused to consider a reduction in taxes on aviation turbine fuel.

West Bengal finance minister Asim Dasgupta, who chairs the committee, told newspersons after the meeting, ''The mood of the states is not to review sales tax rates on ATF. The states have a full consensus on the issue.''

The states are also opposed to ATF being given 'called declared goods status', which would set a uniform 4 per cent state-level tax across country. At present, sales tax on ATF varies from four per cent in Andhra Pradesh to 29 per cent in Tamil Nadu and Kerala, and 30 per cent in Gujarat.

The civil aviation ministry and airline companies had sought the inclusion of ATF in the special category list to help the ailing airlines. Jet fuel constitutes 40 per cent of an airline's operational cost. But the proposed move would mean a substantial revenue loss to states, which collect over Rs2,500 crore every year from sales tax on ATF.

States are also reluctant to reduce sales tax on ATF as they are apprehensive that airlines would not pass the benefit to customers. The empowered committee had asked the civil aviation ministry to clearly explain if flying cost for consumers would come down if sales tax rate is reduced.

'Near-consensus' on GST
On the proposed general sales tax, which will replace excise duty and service tax with a composite tax regime, Dasgupta said the empowered group is likely to finalise the list of exempted items in the first week of October, but did not indicate what items might be exempted.