In what may come as a big disappointment to cash-strapped airlines, the empowered group of state finance ministers deferred its decision on rationalisation of sales tax.
Kerala to roll back concession of 28% on the levy
BANGALORE: In what may come as a big disappointment to cash-strapped airlines, the empowered group of state finance ministers on Monday deferred its decision on rationalisation of sales tax on aviation turbine fuel (ATF) to June 23.
Reeling under the soaring cost of jet fuel, aviation companies were expecting some relief from sales tax cuts.
What they got instead was an added burden as Kerala decided to roll back the concession it is now offering on the levy. The southern state had slashed sales tax to 4% from 32% some time ago to boost air traffic to Kerala.
But since airlines did not pass the benefit on to passengers and the state did not see any surge in air traffic, it decided to cancel the benefit.
Four other states-Madhya Pradesh, Maharashtra (excluding Mumbai and Pune) and Rajasthan-continue to levy sales tax of 4% on ATF.
The group of ministers, which will meet in Srinagar next, has asked the civil aviation ministry for details on how the prices of jet fuel are fixed and how they can be brought down.
In a presentation to the Prime Minister on June 11, the civil aviation ministry had said that states would not lose out much if they lowered the levy on ATF as it constituted only 1-2% of their total sales tax collection. Sources peg the amount states earn from sales tax and excise duty on ATF at Rs 5,000 crore.
On their part, airlines are hoping that ATF is notified under ‘declared goods’. This will bring down the levy on it from 32% to 3%. Asked about the chances of a cut in the charge, Jeh Wadia, the managing director of budget airline GoAir, said, “These things take time. It’s a bit premature to comment on the issue. The group is meeting in Srinagar again.”
Meanwhile, the industry’s capacity is dwindling as is the number of flight clearances by the Directorate General of Civil Aviation (DGCA). Civil aviation ministry statistics showed that the number of flight clearances by the DGCA dropped 6.06% between January and April. From 1,260 flight clearances in January, they slipped to 1,204 in March and fell further to 1,188 in April. The May figures have not been released yet. “This is an indication of capacity squeeze in the industry,” said GoAir’s Wadia. Like others in the industry, the budget carrier has decided to cut capacity by 5-10% in the coming months.
p_sharma@dnaindia.net
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