Emphasising the need to rationalise tax rates on jet fuel, Civil Aviation Minister Jyotiraditya Scindia on Thursday said lower rates will bring in more flights and act as an economic multiplier that will be "50 to 100 times more" than what states earn from a low level of revenue from Value Added Tax (VAT).
Aviation turbine fuel (ATF) cost is a significant component of the operational expenses of carriers and the civil aviation ministry has been pitching for lower rates in order to boost the airline industry that has also been adversely hit by the coronavirus pandemic.
"There are two solutions to the issue of VAT on ATF. Go to every state for rationalisation (of VAT) so that there is a level playing field... Today, there are 8 to 9 states that are ranging between 1 to 4 per cent. Other states vary from 4 to 30 per cent. So much so that sometimes there is variation at inter-state also. So, some states have different for certain cities," Scindia said.
Addressing a press conference here, the minister noted that lower the rates, more flights will come in and the economic multiplier will be 50 to 100 times more than what you (states) earn from a low level of revenue from VAT.
"If you look at all states, the VAT revenue from all states is ranging between Rs 3,500 to Rs 4,000 crore. It is not a large amount of money, but it is a huge multiplier in terms of economic growth," Scindia said.
Noting that there is a long way to go in increasing air travel and that the market is there, he said rationalisation of VAT is important in this regard.
"Second way is through the GST. For that too, it is the states that will decide on that... Ultimately, the responsibility lies with the states. It is important for us to canvas with the right constituencies, which is states as well as the Ministry of Finance," he said.
To a query on ticket refund policy, Scindia made it clear that markets should be allowed to perform that function. I do not think that mandating policy on every front should be the domain of the government. You should allow the free market to function," he added.
