Delhi government on Wednesday slashed the value-added tax (VAT) on aviation turbine fuel (ATF) to 1% from the current 25% for flights to the north-east regions and other remote parts of the country.
In a boost for the central government’s regional connectivity scheme (RCS), outlined in its new aviation policy, the Delhi government on Wednesday slashed the value-added tax (VAT) on aviation turbine fuel (ATF) to 1% from the current 25% for flights to the north-east regions and other remote parts of the country.
The reduced ATF prices, however, will not apply to all flights out of Delhi to the north-east and other centers but only those that are categorised under RCS and fly to identified unserved or under-served airports of the country.
The government’s policy on RCS has capped the fare on such flights and by reducing the duty on ATF, the state government will be contributing its share to make them viable.
There are around 600 airports which have been identified as under-served and unserved in the country and Delhi is not amongst them. However, since a large number of flights originate from the capital, the civil aviation minister had on February 9 written to the Delhi government requesting it to reduce the duty on ATF.
Under RCS, fares would be capped at R2,500 for half of the seats on a one-hour flight. To minimise operational cost on these routes, the state and central governments will implement a host of concessions.
While the central government will restrict excise duty on aviation turbine fuel to 2% and fund 80% of the viability gap funding (VGF), the state-owned airport operator AAI will waive landing and parking charges, among other fees. The state government will share the rest of the VGF and will also reduce the VAT on ATF to 1%.
Further, the states will have to provide fire and security services at the airport free of charge. A small cess will be levied on tickets for non-RCS routes.
So far, the civil aviation ministry has signed MoUs with 18 states to come on board for RCS.
Airlines welcomed the move of the Delhi government. “This is a welcome move, which will help reduce costs and, in turn, help bring down fares for flights to smaller airports in the country. We support all initiatives that help reduce fares for our consumers,” Ajay Singh, CMD, SpiceJet, said.
Aditya Ghosh, president and whole-time director, IndiGo, said “while this is a welcome move and would provide the much-needed impetus to RCS, we do request that this tax break is broadened to all air travel out of Delhi.