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The domestic aviation players are concerned that the withholding tax may be imposed on payments for acquisition of an aircraft or an aircraft engine on lease from April this year.

New Delhi , Jan. 5

THE Civil Aviation Minister, Mr Praful Patel, met the Finance Minister, Mr P. Chidambaram, on Wednesday to discuss issues relating to the civil aviation sector.

Official sources indicated that the Civil Aviation Minister took up issues of the Government providing sovereign guarantee to Indian Airlines (IA) for purchase of aircraft and the issue of sales tax on aviation turbine fuel (ATF).

Besides, the issue of tax exemption on payments made by an Indian company to acquire an aircraft or an aircraft engine on lease from a foreign State or foreign enterprise is understood to have figured prominently at the meeting.

In the Union Budget for 2004-05, Mr Chidambaram had withdrawn the exemption for such payments but later on representation extended the exemption till March 31, 2005.

The domestic aviation players are concerned that the withholding tax may be imposed on payments for acquisition of an aircraft or an aircraft engine on lease from April this year.

They contend that the imposition of the withholding tax could put severe financial pressure on the bottomline of several airlines including IA, Air India and private sector airlines like Jet Airways and Air Sahara, which have leased aircraft in their fleet.

The sources indicated that during today's meeting, the team from the Finance Ministry suggested that one way of getting over the problem of withholding tax was to purchase aircraft.

Officials from the Ministry of Civil Aviation are said to have explained the lengthy procedure that has to be followed by the State-owned airline to purchase aircraft.

On the issue of sales tax on ATF, the sources said that there was a positive reaction from the Finance Ministry team on taking steps to reduce the price of ATF.

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Praful Patel takes up aviation issues with Chidambaram

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