Patel wants states to forgo tax on jet fuel

Seeks uniform sales tax rate of 4% on ATF

NEW DELHI: The zooming aviation turbine fuel (ATF) prices continue to cause concern to the airline industry and civil aviation minister Praful Patel has once again come forth with help. He has written a letter to chief ministers of all states, as a precursor to a meeting with them scheduled for January 18, seeking sales tax relief so that ATF prices can be regulated.

Citing the mounting losses of the aviation sector players due to the sharp rise in ATF prices this year, Patel has once again sought a uniform sales tax rate of 4% from all states while asking them to classify ATF under “declared goods”.

Patel’s missive to CMs follows many meetings he and top civil aviation ministry officials have held with petroleum minister Murli Deora and the chiefs of oil marketing companies on the issue. He is also believed to have made a similar request to the finance minister.

Pointing out that ATF pricing in India is 70% higher compared to international benchmarks, the minister has said this practice leads to loss of competitiveness by the airlines. He said the combined industry losses last year touched Rs 2,000 crore.

Giving the example of Maharashtra and West Bengal, Patel noted that between 2003-04 and 2006-07, state revenues from ATF sales tax collections rose 134% and 159% respectively.

“Although revenue from sales tax on ATF contributes only 0.5-2% of the total sales tax collection in most states, the growth in real terms has been significant…given the negligible contribution to overall sales tax collections, the impact of a reduction on sales tax rates for ATF for the state exchequer would be negligible,” he said.

ATF prices account for 40% of the operating costs of Indian carriers against only 20% for international carriers. Besides rationalisaing the sales tax, ministry officials are also pitching against the calculation of ATF prices using the Import Price Parity mode since India is surplus in ATF production and does not need to import the fuel for domestic needs.

“It is surprising that ATF is cheaper in, say, Singapore than in Mumbai because of this skewed pricing math. The mindset that air travel is a luxury and therefore should be taxed heavily must be corrected,” they said. In the last four months alone, ATF prices have risen by over Rs 9,600.

b_sindhu@dnaindia.net