Domestic airlines flying abroad need not pay ATF tax

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K.R. Srivats
Ashwini Phadnis

New Delhi, Feb. 28

IN a move that will benefit Indian carriers operating abroad, the Budget has proposed declaring sale of Aviation Turbine Fuel (ATF) to any designated Indian carrier operating abroad as deemed export.

The move will enable designated Indian carriers to purchase ATF for their international flights without payment of sales tax. The implementation of the Budget proposal is likely to see a drastic reduction in the fuel bill of the domestic airlines flying abroad.

Senior AI officials said that the move would provide a "level-playing field" to Indian carriers that were earlier forced to pay sales tax on ATF although foreign airlines operating to and from India did not pay the tax. The sales tax, which is charged by the State Governments varies from a high of close to 39 per cent to about 4 per cent.

"Aviation is a high-cost business. Any move which will help reduce our cost structure will help us and also the passenger," a senior AI official said on whether the move would lead to any reduction in airfares from India.

(This article was published in the Business Line print edition dated March 1, 2005)
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