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Aviation Provisions in Budget 2007-08



UNION BUDGET 2007-08
Extracts of Aviation Related Provisions


I. ATF sold to Regional Jets included in list of declared good

List of declared goods under section 14 of the CST Act to be amended to cover all small aircraft with minimum takeoff mass of less than 40,000 kgs operated by scheduled airlines.

Budget Highlights

Finally, there is a small matter which has large beneficial consequences. In 2001, 'Aviation Turbine Fuel sold to turbo-prop aircraft' was included in the list of declared goods under section 14 of the CST Act. Turbo-prop aircraft have been replaced by new generation small aircraft which have taken air services to smaller airports and to the remote parts of the country. Hence, I propose to amend the provision to cover all small aircraft with maximum takeoff mass of less than 40,000 kgs operated by scheduled airlines.

Budget Speech

132. In the Central Sales Tax Act, 1956, in section 14, for clause (iid), the following clause shall be substituted, namely:- '(iid) Aviation Turbine Fuel sold to an aircraft with a maximum take-off mass of less than forty thousand kilograms operated by scheduled airlines. Explanation.-For the purposes of this clause, "scheduled airlines" means the airlines which have been permitted by the Central Government to operate any Scheduled air transport service.'.

Finance Bill

Clause 132 seeks to amend clause (iid) of section 14 of the Central Sales Tax Act, 1956 with a view to provide that the Aviation Turbine Fuel sold to an aircraft with a maximum take-off mass of less than forty thousand kilograms operated by scheduled airlines shall be included in the list of goods of special importance in inter-State trade or commerce, so as to rationalise this provision to cover all the similarly placed aircrafts, irrespective of whether they are Turbo-Prop or otherwise, with the object of improving air connectivity to remote parts of the country by restricting the rate of Sales Tax or Value Added Tax on Aviation Turbine Fuel sold to such small aircrafts. Further, it is proposed to provide an Explanation with a view to define the term "scheduled airlines".

Notes on Clauses

Clause (iid) of Section 14 of the Central Sales Tax Act, 1956 is being amended with a view to rationalize this provision and to have a more precise definition, so as to cover all similarly placed aircrafts, irrespective of whether they are Turbo-Prop or otherwise, with the objective of improving air-connectivity to remote parts of the country by restricting the rate of Sales Tax/VAT on Aviation Turbine Fuel sold to such small aircrafts. In addition, the term 'scheduled airlines' has also been defined.

Budget Memorandum

II. Amalgamation of Public Sector Companies engaged in the business of operation of aircraft

Under the existing provisions of section 72A, the accumulated losses and unabsorbed depreciation of the amalgamating companies or company shall be set-off against the profit of the amalgamated company. Presently, the benefit is available in case of amalgamation of a company owning an industrial undertaking or a ship or a hotel with another company. Such benefits are also available in the case of amalgamation of a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 with a specified bank. It is proposed to amend the said section so as to extend the benefits of carry-forward and set-off of accumulated losses and unabsorbed depreciation available under section 72A to amalgamation of one or more Public Sector Company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business. This amendment will take effect from 1st April, 2008 and will, accordingly, apply in relation to the assessment year 2008-09 and subsequent years. [Clause 17]

Budget highlights

17. In section 72A of the Income-tax Act, for sub-section (1), the following sub-section shall be substituted with effect from the 1st day of April, 2008, namely:- "(1) Where there has been an amalgamation of-
  1. a company owning an industrial undertaking or a ship or a hotel with another company; or
  2. a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 with a specified bank; or
  3. one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.".
Finance Bill

Clause 17 of the Bill seeks to amend section 72A of the Income-tax Act which relates to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. The provisions contained in sub-section (1) of the said section provide that where there has been an amalgamation of a company owning an industrial undertaking or a ship or a hotel with another company or an amalgamation of a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 with a specified bank, then, notwithstanding anything contained in any other provision of the Income-tax Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for an unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and the other provisions of the Income-tax Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. It is proposed to substitute sub-section (1) of the said section so as to include amalgamation of one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business also. This amendment will take effect from 1st April, 2008 and will, accordingly, apply in relation to the assessment year 2008-09 and subsequent years.

Notes on Clauses - Income Tax

III. Private Import of Aircraft

Duty of 3% (WTO bound rate) to be levied on all private import of aircraft including helicopters; such import to also attract countervailing duty and additional customs duty.

Budget Highlights

Import of aircraft, including helicopters, by Government and scheduled airlines is, at present, exempt from all duties, and that position will continue. However, there is no reason to allow the exemption to other private importers. Hence, I propose to levy an import duty of 3 per cent, which is the WTO bound rate, on all private import of aircraft including helicopters. Such import will also attract countervailing duty and additional customs duty.

Budget Speech

Exemptions from tariff to aircrafts are being restricted to Government imports and imports by scheduled airlines.

Fiscal Policy Strategy Statement

IV. Customs duty on Aircraft & parts for private aircrafts
  1. Customs duty of 3% has been imposed on aircrafts. CV duty of 16%, and special additional duty of customs of 4% has also been imposed on such aircrafts. Imports by scheduled airline operators and Government will be exempt.
  2. Customs duty of 3%, CVD of 16%, and 4% additional duty of customs has been imposed on parts of aircrafts, imported for use in such aircrafts. Imports by Government and scheduled airlines will be exempt.
  3. Aircraft, not registered in India, which are brought for the purpose of flight to or across India and ultimately removed within six months from the date of arrival are, however, exempt from all duties of customs.
Clause 124 seeks to amend First Schedule to the Central Excise Tariff Act so as to enhance the duty on various types of cigarettes falling under Chapter 24, to enhance the tariff rate on certain types of Cements falling under Chapter 25 from Rs 400 per tonne to Rs. 600 per tonne, to prescribe the tariff rate on all tariff items which cover nylon fishnet fabrics, fishnet twine and fishnet in Chapters 54 and 56 at 12%, to modify the tariff rate on televisions, monitors, etc., of all types falling under Chapter 85, from 16% or Rs. 34,000/- whichever is higher to 16%, and to enhance the tariff rate on aeroplanes, helicopters, other aircrafts and their parts falling under Chapter 88 from Nil to 16%.

Notes on clauses

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