J&K reduces VAT on ATF to 1%; airlines expected to reduce fares

On Monday, the VAT on air turbine fuel has been reduced to 1 percent in Jammu and Kashmir.

The price of ATF is a major component of the operating cost of airlines, and the state's levy on ATF significantly increases its price.

According to industry estimates, ATF prices constitute over 40 per cent of total operating cost of domestic carriers and this was 70 per cent higher than the global average.

Prior to the reduction, the Union Territory was levying a 26.5 per cent VAT on ATF, thereby, making flight tickets more expensive on air routes connecting the state to the rest of the country.

Consequent to the reduction, airlines are expected to reduce ticket prices.

"The UT of J&K marks a new dawn for air connectivity in the region. Following the lead of the pro-active governments of Uttarakhand and Andaman and Nicobar Islands, the UT of J&K has also drastically reduced VAT on ATF from 26.5% to 1%," said Civil Aviation Jyotiraditya M. Scindia in a tweet

"I would also urge the remaining States to emulate, and get on to the bandwagon of greater regional connectivity. Lower operational costs for airlines has a causal effect on flight connectivity."

"Given the disruption caused by the pandemic, it is important that States collaboratively work with @MoCA_GoI to not just bring the sector back on track, but also trigger greater economic activity in their respective regions."