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Led by Mr Vijay Mallya, Chairman of Kingfisher Airlines, the domestic aviation industry has approached the Maharashtra State Government to rationalise the sales tax on Aviation Turbine Fuel (ATF).
This comes after the aviation industry failed in its efforts to get ATF included in the ambit of Goods and Services Tax.
Aviation industry body, Federation of Indian Airlines (FIA), which also represents Kingfisher Airlines, has now decided to go to states individually asking them to ease the sales tax on ATF.
Maharashtra is the first state to be approached by the FIA. The association has asked the State Government to change the sales tax structure from 25 per cent ad valorem to a fixed tax rate corresponding to ATF prices benchmarked at Rs 30/litre.
Ad valorem is a tax based on the quantity of sale.
According to a senior Maharashtra Government official, Chief Minister Mr Prithviraj Chavan, has taken a note of the issues raised by FIA. He has asked the concerned departments to compare sales tax on ATF in Maharashtra with other states, sales volume would also be compared. Based on which the government will arrive at a final decisions.
The FIA claims that a rationalisation of ATF sales tax in the state would see more aircraft re-fuelling in the state, thereby giving the state more volumes of sales.
A change in the tax structure would ease the tax burden on airlines which forms 35-40 per cent of the cost component for airlines.
“We will approach more states to ease taxation on ATF. This will ensure that the airline industry does not keep suffering from an irrational tax structure,” said an official of the FIA.
The rate of sales tax on ATF in Maharashtra is one of the highest in states across India. In Delhi, sales tax on ATF stands at 20 per cent, while in Gujarat it is at 30 per cent and in Andhra Pradesh the sales tax on ATF stands at 16 per cent.
FIA has been asking the Government to declare ATF as ‘declared goods' so that it attracts uniform sales tax of four per cent across India. But the Government hasn’t yet conceded the aviation industry’s demands. At the moment, sales tax on ATF varies from 4 per cent to more than 30 per cent across the country.
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