Aviation ministry seeks sops to boost sector

Asks for tax cut on jet fuel, credit on GST, and green light to airlines for ECBs

The aviation sector could soon get a breather, with the Centre mulling reforms that might provide tax relief and allow airlines to tap foreign lenders. The ministry is in discussion with the finance ministry to lower tax rates on jet fuel or ATF, increase advantages under the GST, and allow airlines to raise working capital loans abroad. ARINDAM MAJUMDER & ANEESH PHADNIS report

The aviation sector, currently weighed down by distress, could soon get a breather, with the government planning reforms that might provide tax relief and allow airlines to tap foreign lenders.

The civil aviation ministry is in discussion with the finance ministry to lower tax rates on jet fuel or ATF, increase advantages under the goods and services tax (GST), and allow airlines to raise working capital loans abroad. Civil Aviation Minister Suresh Prabhu and Minister of State for Civil Aviation Jayant Sinha, in a meeting with Finance Minister for its losses as global crude Arun Jaitley earlier this week, said prices fell to $30 a barrel. The crude these steps could help the industry. prices have since doubled.

Sources privy to the discussion ATF costs are a big pain for Indian said the civil aviation ministry has carriers. Besides the Centre’s duty, asked for a cut in excise duty from states also have their own sales taxes, 14 per cent to 8 per cent on aviation and the airlines often end up paying turbine fuel (ATF). The government up to 29 per cent levy. When the oil had raised the duty in 2016, to compensate prices were low between 2014 and 2016, the full effects of such high taxes were masked. Now, they are more evident.

The aviation ministry has also asked for input tax credit under the GST on economy class tickets.

The GST, which was rolled out on July 1 last year, provides for certain input tax credit only on business class tickets. In the new indirect tax regime, economy class tickets have a levy of 5 per cent. Input tax credit is allowed only on input services. Business and first class tickets have a GST rate of 12 per cent, but full input tax credit.

“Input credits for economy class should be allowed. The matter might be followed up with the revenue department,” said a chief financial officer (CFO) of a private carrier.

Domestic airlines, especially low-cost carriers, have pitched for full input tax credit on economy class tickets.

“In the absence of any exemption on import of aircraft and aircraft spares, ATF not being covered within the ambit of the GST, and with such restriction on credit of inputs on economy class, the cost and cash flow impact to the airlines is likely to be very detrimental,” the CFO quoted above said.