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Thursday, 09 March, 2017, 12 : 00 PM [IST]

Delhi reduces VAT on ATF to 1% to aid UDAN scheme

As per The Hindu report, flying to smaller towns or remote parts of the country from the national capital is set to become cheaper, with the Delhi government deciding to substantially bring down taxes on jet fuel. Presenting the Delhi Budget 2017 on Wednesday, Deputy Chief Minister Manish Sisodia said the Value Added Tax (VAT) on aviation turbine fuel (ATF) will be brought down from the 25% to 1% for flights to smaller towns and remote areas such as the North-East to complement the Centre’s regional connectivity scheme. One of the biggest costs of operating flights is aviation fuel. Adding VAT to the mix makes airfares costlier. Price of jet fuel in Delhi is about INR 54,000 per kilolitre.

Sisodia said the drop in jet fuel taxes was proposed to give a boost to civil aviation operators who had opted to operate under the Regional Connectivity Scheme (RCS) called UDAN. They will ply fights on RCS routes (involving Delhi) between an identified pair of origin and destination airports or helipads within the country pursuant to the scheme satisfying the prescribed conditions.

Stating that people from different parts of the country live and work in Delhi, Sisodia said the lowering of taxes will help improve connectivity to smaller towns or remote areas that are not very accessible at present. While India is one of the fastest growing aviation markets in the world, most flights are concentrated between major cities including the lucrative Delhi-Mumbai or Delhi-Bengaluru sectors. Many smaller towns have airports, helipads and airstrips, but these see very few flights.

“This is a welcome move. It will help reduce costs and, in turn, bring down fares of flights to smaller airports in the country,” said Ajay Singh, Chairman, SpiceJet.

However, others felt the benefit should’ve been extended to all flights. “While it’s a welcome move and will provide much needed impetus to the RCS, we do request that this tax break is broadened to all air travel out of Delhi, as it will allow us to provide even more affordable air travel to millions of customers out of Delhi, which is our biggest base of airplanes,” said Aditya Ghosh, President, IndiGo. (Source: The Hindu)

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