Tag Archives: ATF

Minimum 10-15% increase in airfares must due to ATF price increase, rupee slide: SpiceJet CMD

The sharp increase in aviation turbine fuel (ATF) prices and the depreciation of the rupee have left the domestic airlines with no choice but to immediately raise airfares, said Ajay Singh, Chairman and Managing Director, SpiceJet.

A minimum 10-15 per cent increase in air fares is required to ensure that cost of operations are better sustained, Singh said in a statement. “ATF prices have increased by more than 120 per cent since June 2021. This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world,” he said.

SpiceJet has in the last few months tried to absorb as much burden of this fuel price rise, which constitutes more than 50 per cent of our operational cost, as we could, he said. “The weakening of the Indian rupee against the US dollar further significantly impacts airlines as our substantial cost is either dollar denominated or pegged to the dollar.” (Source FE)

ATF prices reach record high with latest hike of 16.3%

The price of aviation turbine fuel (ATF) was hiked by 16.3 per cent, to INR 1.41 per kl ( INR 123.03 per litre) in the national capital, according to a price notification of state-owned fuel retailers. Jet fuel, which makes up for almost 40% of the running cost of an airline, has this year surged to new highs. ATF prices have increased every fortnight since the start of 2022.

On 3 June, the price of ATF was reduced by 1.3 percent which was the first reduction after being hiked for 10 rounds of hike in ATF prices.

Meanwhile, in a bid to strengthen air connectivity to the state and boost tourism, the Jharkhand government on Wednesday announced it had slashed VAT (value added tax) on ATF to 4 per cent from 20 per cent.
The decision to reduce tax has been taken to increase air connectivity in the state and bring down airfares to boost tourism, a statement by the state government said.

“The State Government will amend serial number one of Schedule- II Part-E of Jharkhand Value Added Tax Act, 2005 in order to improve the air connectivity in the state. Under this, the tax rate on Aviation Turbine Fuel (ATF) will be reduced from 20 per cent to 4 per cent,” the statement said.

ATF makes up for about 40 per cent of the operating cost of an airline. Jet fuel prices are at a record high in line with the global surge in energy prices. And since India is dependent on imports to meet its oil needs, the only way to cut jet fuel prices is to reduce taxes.

ATF presently is chargeable at an 11 per cent ad valorem rate of excise duty. A concessional rate of 2 per cent is applicable for ATF sold under the Regional Connectivity Scheme.

Ad valorem rate means the incidence of taxation rises whenever there is an increase in the base price. ATF attracts both excise duty of the central government and sales tax or VAT of states. (Source: Mint)

 

‘No decision yet to cut tax on ATF’

The Finance Ministry has not yet taken a view on the Ministry of Civil Aviation’s (MoCA) plea for tax cuts on jet fuel (ATF) to bring down prices, a top source said.

Civil Aviation Minister Jyotiraditya Scindia has been making a case for lowering the high taxes on ATF even as most states have already moved to significantly reduce the value-added tax (VAT).

“They (Civil Aviation Ministry) have approached us with a plea to moderate the prices. However, no decision has been taken yet,” the source said.

MoCA continues to be in discussion with the Finance Minister over the issue, the source added.
As many as 23 states have lowered VAT on jet fuel from highs of 20-30 per cent. And now it wants the central government to cut excise duty.

ATF makes up for about 40 per cent of the operating cost of an airline. Jet fuel prices are at a record high in line with the global surge in energy prices. And since India is 85 per cent dependent on imports to meet its oil needs, the only way to cut jet fuel prices is to reduce taxes.

While some states have reduced VAT, the states housing the country’s busiest airports of Delhi, Mumbai, Chennai and Kolkata have not done so yet.

ATF presently is chargeable at an 11 per cent ad valorem rate of excise duty. A concessional rate of 2 per cent is applicable for ATF sold under the Regional Connectivity Scheme.

Ad valorem rate means the incidence of taxation rises whenever there is an increase in the base price.
Some in the industry have demanded that the government bring specific excise duty expressed in Rs per kilolitre to insulate airlines from such volatility.

Petrol and diesel already attract a specific rate of excise duty.

ATF attracts both excise duty of the central government and sales tax or VAT of states. This because when the Goods and Services Tax (GST) was introduced on July 1, 2017, amalgamating 17 central and state levies, five commodities — namely crude oil, natural gas, petrol, diesel, and ATF — were kept out of its purview given the revenue dependence of state governments on this sector.

The aviation ministry has time and again sought the inclusion of ATF under GST. The oil ministry too has favoured including ATF along with natural gas under the GST regime to help companies set off tax that they pay on input.
So far no proposal for including ATF in GST has been made to the GST Council — the apex decision-making body of the new indirect tax regime. (Source: PTI)