The government is in talks with four states to reduce value-added tax (VAT) on aviation turbine fuel (ATF) amid supply chain disruptions due to the West Asian war over the past two months.
The Ministry of Civil Aviation has held separate meetings with the governments of Delhi, Tamil Nadu, West Bengal, and Maharashtra to seek relief on VAT levied by the states on jet fuel, CNBC Awaaz reported.
The four states levy the highest VAT on ATF in the country. Tamil Nadu charges 29 percent VAT, the highest among them. Delhi levies 25 percent, while Maharashtra charges 18 percent VAT on ATF.
Delhi and Maharashtra have the country’s busiest airports: Delhi’s Indira Gandhi International Airport and Mumbai’s Chhatrapati Shivaji Maharaj International Airport.
The Civil Aviation Ministry is reported to have presented two proposals to the four state governments.
The first proposal seeks a temporary reduction in VAT, either for three or six months, across the state.
The second proposal seeks a reduction in VAT only at some high-traffic airports, such as Delhi’s Indira Gandhi International Airport and Mumbai’s Chhatrapati Shivaji Maharaj International Airport, without requiring a statewide policy change.
The ministry is in active discussions with the states and expects at least one of the two proposals to be accepted.
The move is the latest effort by the Centre to provide relief to domestic airlines amid rising operating costs due to the energy crisis following the start of the Iran war.
The government has already provided a partial shield from the 115 percent hike in ATF prices earlier this month. It has capped the increase in ATF prices for domestic airlines at 25 percent.
However, no such relief has been provided for overseas-bound flights. Hence, ATF prices for domestic flights in Delhi are currently at Rs 1.04 lakh per kilolitre, a rise of 8.5 percent from earlier, while fuel costs Rs 2.07 lakh per kilolitre for overseas flights.
The government is also planning a Covid-like credit guarantee scheme for the sector.
