While Aviation Turbine Fuel prices are falling relative to their astronomical highs in 2008, airline companies may be in for better times as the Delhi government is considering a cut in the contentious sales tax on the fuel.
With Delhi and Mumbai accounting for a bulk of the domestic air traffic and international flights, a cut in sales tax in Delhi would be significant. Almost 20% of the total fuel tankering is currently done in the national capital and industry sources believe this could rise to 25% or more.
Currently, sales tax on aviation fuel in Delhi is 20%, while in Maharashtra, it is taxed at 25%. ?The sales tax in aviation fuel in Delhi should come down, I won?t make a promise but I will try and do that,? Delhi chief minister Sheila Dikshit said.
Dikshit?s statement comes soon after the empowered committee of state finance ministers opposed a cut in the sales tax on aviation turbine fuel to 4%. But former finance minister P Chidambaram had said that a bill to put ATF in the declared goods category could be tabled in Parliament, if it has adequate support.
?With Delhi becoming the hub for international passengers, the matter of decline in sales tax gains prominence. I have been told that Hyderabad (Andhra Pradesh) has reduced its taxation but Delhi is still high,? she said. Andhra Pradesh had cut sales tax on ATF to 4% in 2008.
?If the reduction in the sales tax takes place, it will have a beneficial impact on the airlines because Delhi and Mumbai account for bulk of the traffic,? said Kuljeet Singh, partner, transaction advisory services, Ernst&Young. ?It will help the domestic and international airlines and more importantly air charter and business jet operations,? said Mark Martin, senior advisor, KPMG.