The Hindu Business Line : Govt mulls options to ease tax burden on lease of aircraft

THE chief executives of domestic airlines can sleep in peace once again. The Government is said to be considering options to ensure that the financial burden, which the airlines would have to face from September 1, on account of the proposed tax on leasing of aircraft is softened.

Official sources confirming this to Business Line said the Minister for Civil Aviation, Mr Praful Patel, has already spoken to the Finance Minister, Mr P. Chidambaram, to consider the various representations, which have been made by the airlines.

However, officials were careful not to use the word "roll-back" even as options are being examined to find a way out of the proposed taxes on leasing of aircraft.

Sources indicated that one of the options, which the airlines may be asked to consider, is leasing aircraft from countries with which India has a treaty for avoidance of double taxation. The Finance Minister has proposed that payments made by an Indian company to acquire an aircraft or an aircraft engine on lease from a foreign state or foreign enterprise will not be exempt from tax. These exemptions will cease prospectively from September 1 this year, Mr Chidambaram said on July 8 while presenting the Budget for 2004-05.

The proposed move is likely to place an annual burden of Rs 86 crore on Indian Airlines and Rs 91 crore on Air India, respectively apart from affecting the fortunes of the various private sector airlines. Among the private sector airlines, which could be badly affected by the proposal, if implemented, could be the country's only low-cost airline, Air Deccan.