Home / Budget / Budget Expectations /  Aviation industry seeks tax relief in the Union budget

The civil aviation industry, which is finally experiencing a resurgence after enduring weak demand and debilitating financial losses over the past two years, has seen signs of recovery in the December quarter. The industry now hopes the government will provide relief on taxation in the upcoming Union budget to bring down the cost structure for airports and airlines.

Jet fuel, which constitutes 35-40% of an airline’s expenditure, is at the heart of the concerns of the airlines. While some hope for a cut in central excise duty on jet fuel from 11% at present to 4-5%, others hope for the total removal of the component.

Regional carrier Star Air is among those in favour of zero excise duty on jet fuel. “GST Council should allow input credit of the 5% GST we collect from economy class passengers. VAT on ATF should be converted to GST, and input credit in the same should be allowed," said Capt. Simran Singh Tiwana, chief executive of Star Air.

Indirect taxes, which make up over 20% of an airline’s revenue, have been criticized by airlines as an unreasonable proposition.

“All the airlines are under deep financial stress. However as per the provisions of the Income Tax Act, 1961, income tax is deducted at source by customers while making payments to airlines. This blocks the cash flow of the airlines for years till the income tax assessments are completed, and refunds are granted," an airline executive said on the condition of anonymity.

The Association of Private Airport Operators, meanwhile, said they are hopeful of a suspension of minimum alternative tax (MAT) for aviation and airport sector for at least two years, and in case total exemption of MAT cannot be granted, the airport body has requested for reduction in effective minimum alternate tax rate from 17.47% to 5% for infrastructure companies such as airports.

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