New Delhi: Those who charter business jets may have to pay a little more for the privilege if the aviation ministry pushes for the implementation of a tax on the import of such aircraft, said two officials familiar with the development on condition of anonymity.
The reasoning is that such a move would seal off a loophole that exempts business jets imported to run charter operations from customs duty, although those purchased for private use are taxed at 26%.
The finance ministry’s department of revenue (DoR) has suggested a “nominal” tax, said the officials cited above.
The aviation ministry is considering three options, one of them said. It may choose to continue with the current regime with stricter regulations to prevent private users from evading duty by showing charter operations. Another option is to go back to the pre-2007 regime, when no customs duty was levied on either charter or private users. The third, and said to be the most likely, is to impose a nominal customs duty on both types of purchase. The tax under consideration is 3% plus some countervailing duties.
“No views have been firmed up yet. DGCA’s opinion is being sought, after which the aviation ministry will recommend what their views are to DoR,” the official said, referring to the aviation regulator, the Directorate General of Civil Aviation.
DGCA issues scheduled licences to airlines and non-scheduled ones to chartered carriers, along with licences for private use and training. It has issued at least 121 charter licences for 360 aircraft, including helicopters and business jets.
Large corporations, such as Mukesh Ambani’s Reliance Commercial Dealers Ltd, Anil Ambani’s Reliance Transport and Travels Pvt. Ltd, Bajaj Auto Ltd, DLF Ltd, GMR Aviation Pvt. Ltd, GVK Project and Technical Services Ltd and Sun TV Network Ltd, have their own fleet, according to DGCA. Mid-cap firms are also buying smaller or second-hand business jets.
“Imposing a duty will kill the industry, especially the small guys,” said a top official with a charter firm, who declined to be named. “Import duty is to protect local industry. To have it on aircraft is bizarre.”
For charter operators and smaller business houses, any levy on business jets that cost $4-80 million would mean a significant payout. A 3% tax on a Rs 30 crore business jet would be Rs 90 lakh.
For a charter firm, “that could be your entire year’s revenue. You will go under”, he said, adding that such a move will also affect future induction plans. “Everybody will have to reconsider deliveries.”
Deccan Charters Ltd’s G.R. Gopinath said the government should punish those who violate norms instead of making aviation more expensive.
“There is already a case going in the courts, on people who brought the aircraft for personal use,” he said. “You have to punish the guys who are guilty rather than the guys who are doing it for charter use. You have to see who is evading and not make it a blanket duty. DGCA should give a licence keeping that in mind and make checks and balances to ensure that it is implemented.”
The new proposal may have emerged after a crackdown in the last two years on business houses that imported business jets citing their use for charter services but were mostly deployed for private use to reach out to remote areas such as mines and forest land where there is little connectivity, analysts said.