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Airlines, ministry urge panel for action on high ATF taxes

NEW DELHI: All the airlines companies, backed by the civil aviation ministry, are planning to urge the empowered committee of state finance ministers to pursue states for reducing tax on aviation turbine fuel (ATF). Currently, sales tax imposed by states on ATF varies between 4% and 39%.

Airline companies want the states to rationalise the high tax on ATF that accounts for 40% of airlines’ total costs. Airline officials argue that apart from lowering costs, lower tax would result in lower fares and better connectivity. Aviation industry association Federation of Indian Airlines (FIA), along with civil aviation minister Praful Patel, would meet the committee — headed by West Bengal finance minister Asim Dasgupta - to seek rationalisation in taxes, sources said. While tax on ATF used in smaller aircraft has been reduced to 4% in Budget 2007, it has been kept at same level for bigger aircraft.

Civil minister Praful Patel said on Tuesday he will convene a meeting with the empowered committee of state finance ministers to apprise it of the benefits of lowering taxes on ATF. He said lower taxes would lead to increase in air traffic and improved connectivity. Airline firms say they will examine the issue further before proposing a tax reduction. “For various states, there are different level of taxes on ATF. We shall study the aspects before proposing the level to which taxes should be reduced," SpiceJet CEO Siddhanta Sharma said.

Though the meeting date is yet to be finalised, it will be the first meeting between the airline companies and state finance ministers. Analysts note that reduction in ATF price will benefit the airline industry that has been in red for quite some time now. “The 40% growth in the aviation sector is hollow prosperity. Nobody is making money,” KPMG executive director Raajeev Batra said. "Taxes on ATF at both the Centre and state levels should be reduced to make airline operations viable," he said.