The Odisha government today announced that it will exempt from VAT aviation turbine fuel for international flights, in a bid to attract foreign airlines to begin commercial operations in the state.

A proposal to this effect was approved at a Cabinet meet chaired by Chief Minister Naveen Patnaik.

“The Cabinet decided to exempt VAT on ATF for international flights under the provision of Section 17 A of the Odisha Value Added Tax Act, 2004,” Chief Secretary G.C. Pati told reporters after the meeting.

Stating that the General Administration Department has drawn up a prospective civil aviation policy, Pati said some incentives have already been announced by the State government. “To attract international airlines to Odisha, the Cabinet felt it necessary to offer them tax incentives to start operations from the Biju Patnaik International Airport, Bhubaneswar,” he said.

As part of its efforts to strengthen aviation network in the state, the Odisha government has already slashed VAT rate on ATF to 5 per cent from the earlier 20 per cent from December 1, 2013.

“As of now, domestic air connectivity to the Biju Patnaik International Airport in Bhubaneswar has substantially improved compared with the period before December 1, 2013, due to tax reduction on ATF. But till now, not a single international airline operator has started flight from Bhubaneswar as it does not seem to be commercially viable,” Pati said.

Air India has informed the State government that it would consider extension of Dubai-Mumbai flights to Bhubaneswar subject to improvement of resources and commercial viability of operation, its CMD said.

Indigo, too, has assured the State to consider its proposal by extending its Dubai-Mumbai and Bangkok-Kolkata flights to Bhubaneswar if VAT on ATF is reduced to zero per cent for international flights only.

To a specific query, Pati said the collection from ATF during the past three years averages ₹30 crore per annum.

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