It’s not all-clear for take-off

For the aviation industry that wanted to take wings, this year’s budget has come as a “huge disappointment”

All the demands put forth by the airline operators — reduction in the duty on aviation turbine fuel besides including it in the notified subject list and continuation of withholding tax on lease and rentals of aircraft — have drawn a blank. Most of the airline operators choose to just ‘not react’ to the budget.

According to Jeh Wadia, Managing Director, GoAir, “Had the ATF taxes been lowered and exemption of withholding tax on lease and rentals of aircraft been extended beyond March 31, 2007, it surely would have been healthier for the industry, with additional benefits in the form of even further lower fares being passed on to our passengers.

 Nevertheless, the Sales Tax on fuel — which is now a declared good — for smaller aircraft weighing less than 40,000 kg will only benefit a very small percentage of airline operators. We hope that this will be further reviewed and extended to aircraft above 40,000 kg, since low-cost carriers predominantly have aircraft weighing more than 40,000 kg. This will further sustain low-fare carriers enabling them to even further reduce fares.”

Chidambaram has instead proposed a three per cent Customs Duty on aircraft and spare parts besides 16 per cent countervailing duty and four per cent special additional duty for importing aircraft. Now “private importers” importing aircraft and helicopters will have to pay an import duty of three per cent as a WTO-bound rate.

Big corporate houses like Reliance, Taj Group, and the Singhanias — who have been contemplating expansion or procuring small aircraft or business jets — have refused to comment off hand. Anil Dhirubhai Ambani Group — in the process of procuring business jet — refused to comment saying, “We do not comment on policy decisions.”

“We are looking into the fine print of the budget speech. What the Finance Minister has stated is that the duty would impact the private aircrafts. We fall into the category of private-non-scheduled operators and that category has not been specifically mentioned. We cannot just speculate,” said a Raymonds spokesperson.

Non-scheduled operators have not much reason to rejoice, feels non-scheduled operator Global Vectra Helicorp Ltd’s Chairman Lt. Gen. (retd) SJS Saighal. “The budget shows rather subdued pertinence to the aviation industry, which also touches helicopter oil and gas logistics industry. We are yet to analyse if the three per cent import duty on all private import of aircraft, including helicopters would apply to us. The budget does not address the expectations of the aviation industry, especially of the non-schedule operators. We were expecting relief on corporate tax and reduction in duty on Aviation Turbine Fuel (ATF).”

Patting the back of the airline operators with small aircraft fleet, Chidambaram has put the ATF sold to all small aircraft with a maximum takeoff mass of less than 40,000 kg operated by scheduled airlines under Section 14 of the Central Sales Tax Act.