Government may reduce jet fuel taxes 

A senior officer said that KIAL has submitted a proposal to the state government seeking a tax sop on ATF as such a move will surely attract more domestic airlines to start services from Kannur.
Representational image. (File | PTI)
Representational image. (File | PTI)

THIRUVANANTHAPURAM: In what could be a shot in the arm for Kannur International Airport Ltd (KIAL), which is set to begin operations in September, the state government is exploring the possibility of reducing the sales tax levied on aviation turbine fuel (ATF) from 28 per cent to 1 per cent.

A senior officer told ‘Express’ that KIAL has submitted a proposal to the state government seeking a tax sop on ATF as such a move will surely attract more domestic airlines to start services from Kannur airport. The carriers could also make Kannur their preferred fuelling point, he said. The government will take a decision soon. However, it is not clear whether the other three airports in the state will get the benefit of the proposed reduction on VAT charges.

According to a senior official, the reduction of VAT has been a long-pending demand of domestic airlines.
The Centre is charging a 14 per cent excise duty on ATF. On top of this, states charge up to 30 per cent sales tax or VAT. While Odisha and Chhattisgarh have slashed the VAT to 5 per cent in order to attract airlines, states such as Tamil Nadu, Karnataka and Maharashtra tax ATF at 29 per cent, 28 per cent and 25 per cent, respectively.

In short, the cumulative tax on ATF, including the excise duty of the Centre and state VAT, comes to around 44 per cent for a state that charges the top rate of 30 per cent. Airports that operate under the proposed regional connectivity scheme UDAN are eligible for a concessional VAT of 1 per cent on ATF. However, Kerala’s decision to pull out Kannur airport from the scheme had dashed the hopes of airlines who were planning to start services.

But the state has not fully given up on the idea of operating regional services under the scheme to unserved destinations from KIAL at a later stage.IATA Agents Association of India president Biji Eapen said the move to slash VAT on jet fuel is praiseworthy. But it should not be limited to KIAL alone. The other three airports are eligible to get such a benefit as it would ultimately benefit both passengers and airlines, he said.

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