New Delhi: In a decision that could reduce costs for India’s airlines if other states copy it, Rajasthan has become the fourth state to slash sales tax on jet fuel to 4% from 28%.
Fuel accounts for over 40% of operating costs at airlines in India and the tax reduction is being hailed by carriers. Airline firms, whose flights touch Rajasthan, could immediately take advantage of reduced spending on fuel while buying aviation turbine fuel (ATF) in the state.
Jitender Bhargava, executive director of National Aviation Co. of India Ltd-run Air India said the Rajasthan move should be followed by other states as well. “Mumbai and Delhi have to reduce it. Airlines account for half their flights,” he said.
Civil aviation minister Praful Patel has said in the past that he will try and persuade state governments to help airlines by reducing taxes on fuel.
Rajasthan, in its latest budget announced on 9 July, said it was reducing taxes to woo airlines to the state. “To attract the airline services to Rajasthan, tax rate on ATF has been reduced from 28% to 4%,” the state government said.
The state has three main airports at Jaipur, Jodhpur and Udaipur run by Airports Authority of India.
Some states charge as much as 30% of sales tax on jet fuel.
Andhra Pradesh slashed rates on jet fuel to 4% last year. Jharkhand and Chhattisgarh, too, now follow a similar rate.
Kerala, which also had said it may reduce the levy, is still to take that decision while Maharashtra levies a concessional sales tax at all its airports except key hubs at Mumbai and Pune.
Rajasthan in its budget said it has also removed luxury tax applicable on all hotel rooms costing up to Rs3,000 a night in a bid to woo more tourists to the state.
India’s carriers lost around $2 billion, or Rs9,800 crore, in fiscal 2009—a year that saw oil prices touch $140 a barrel and passenger count fall. Reduction of sales taxes levied by states has been a long-standing demand of airlines here.
Industry group, International Air Transport Association, which counts 200 airlines globally among its members, expects the international airline industry to report full-year losses of some $9 billion in 2009 with India’s airlines, which account for just 2% of the world’s passenger traffic, contributing a quarter of that.