AP Govt Slashes VAT on Aviation Turbine Fuel to 1%

Published: 19th September 2014 06:20 AM  |   Last Updated: 19th September 2014 06:20 AM   |  A+A-


HYDERABAD: The Andhra Pradesh government on Thursday slashed Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) just to 1 per cent from the current 16 per cent.

With this, AP emerges as the only state in the country offering the cheapest VAT on ATF. Buoyed by the move, low-cost carrier Air Asia India said it may start flights from AP soon.

‘’It’s a good move and will increase the potential to operate more flights. We have been thinking about it (having operations from AP), but are yet to formalise,” Mittu Chandilya, CEO,  Air Asia told Express.

He, however, ruled out the possibility of operating flights to or from Hyderabad. “It is well connected with several players operating flights. We will not be launching operations from Hyderabad,” he said.

The AP government’s move, which comes weeks after the Union Ministry of Civil Aviation’s missive to states to reduce VAT on ATF, is expected to boost air connectivity and importantly attract air-carriers, most of which are bleeding due to high operational costs.

‘’Hitherto, the State government was charging 16 per cent VAT on jet fuel,” said S P Singh, Principal Secretary (Commercial Taxes). According to sources, the State government during its interaction with multiple air-carriers including Vijayawada-based Air Costa, full cost carrier Jet Airways, Indigo and Spice Jet last month had proposed to offer cheapest sales tax on ATF. ‘’We are talking to them (carriers). The idea is to attract more players,” said a senior government official.

Currently, Gujarat, Orissa, Madhya Pradesh, Chhattisgarh and West Bengal levy 4-5 per cent sales tax on ATF followed by Goa, which last year reduced the tax slab from 22-12.5 per cent.

A revision in the ATF tax structure will reduce the financial burden of airlines as ATF is one of the major cost components for carriers comprising about 45 per cent of the total airline’s cost. The tax rate ranges from 4 per-40 per cent in some states. The Telangana has plans to bring down the VAT on ATF to about 4 per cent.

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