The Hindu Business Line : Airline sector awaits clarity on lease tax exemption

Advertisement

New Delhi Feb 28 With Budget 2007-08 silent on whether the exemption on withholding tax on lease of aircraft and aircraft engines is to continue beyond March 31 this year, confusion prevails in the domestic aviation industry.

"If the exemption is not available there will be a significant increase in the fleet acquisition cost of airlines from India. This will be at a time when demand is outstripping supply. We will still hope that the exemption will be included in the Finance Bill," said Mr V. Thulasidas, Chairman of the Federation of Indian Airlines (FIA).

Sources indicated that if the exemption were withdrawn, most airlines would have to rely on leasing aircraft from a country with which India has double taxation avoidance agreement. "Ireland could be one such country," said a senior airline official.

However, the Budget has provided relief to Air Sahara and Paramount Airways, as they would now be able to procure aviation turbine fuel (ATF) at a uniform four per cent sales tax rate.

The Finance Minister, Mr P. Chidambaram, has proposed extending the concession on ATF being provided to turbo-prop to other small aircraft. "The Budget has provided us with a level playing field. This should help us look at operating flights to long and thin routes such as Coimbatore-Goa and Cochin-Ahmedabad.

Mr M. Thiagarajan

The decision will provide a saving of Rs 60-70 crore annually," said Mr M. Thiagarajan, Managing Director of Paramount Airways.

The decision will help Air Sahara save around Rs 25-30 crore annually, said Mr Alok Sharma, President.