ANDAMANS EYES TOURISM BOOST BY REPAYING VAT ON AIR FUEL

To lure airlines into starting international operations from the Andaman and Nicobar Islands and increase frequency of domestic flights, the island administration has decided to reimburse Value Added Tax (VAT) levied on air turbine fuel of new flights started between now and March 31, 2019, according to officials familiar with the development.

The Islands currently levies 10% VAT on air turbine fuel (ATF). Its administration hopes to reduce fares on new domestic flights through this move and egg on airlines to start international flights to nearby countries such as Singapore, Thailand and Indonesia. “In an initiative to increase frequency of flights and have more competitive/lower airfares on the island-mainland sector, the Andaman & Nicobar administration has decided to reimburse the VAT on ATF paid on those incremental flights, which are introduced in the period up to March 31, 2019,” said an administration official not wanting to be named. Chetan Sanghi, chief secretary, Andaman and Nicobar Islands, tweeted on Friday, “This should bring down the fares by increasing flights to Port Blair. We are watching how airlines respond to this. No one likes oligopolistic exploitation.”

Fuel costs comprise almost 40% of airlines’ expenditure. With rising fuel prices and a weakening rupee, the aviation industry is in a mini crisis. Airlines have been requesting the aviation ministry to bring air turbine fuel under the Goods and Services Tax (GST).

According to an official of the Directorate General of Civil Aviation (DGCA), the Airports Authority of India (AAI) would have to create customs and immigration posts at Port Blair airport before airlines start international operations. The air fare from Kolkata or Chennai to Andaman is seldom less than ~6000, and in peak season it goes upto ~30,000. Traffic at Port Blair airport has been increasing over the past three years, according to data available with the DGCA.

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