Scindia urges 22 states to reduce VAT on ATF to 1-4% to boost air travel

New Delhi: Civil Aviation Minister Jyotiraditya Scindia has urged 22 states and Union territories (UTs) to reduce value-added tax (VAT) on aviation turbine fuel (ATF) and bring it within the range of one to four per cent across all airports in order to give an impetus to air travel, the Ministry of Civil Aviation said on Wednesday.

"The price of ATF is a major component of the operating cost of airlines. With that, the tax on ATF contributes significantly to the ATF price," according to a statement issued by the ministry.

Presently, there is a huge disparity between states and even within the states in terms of the VAT being levied on ATF, the ministry mentioned. In a letter to the 22 states and Union territories, Scindia has "emphasised on the need to reduce the existing VAT/sales tax on ATF to 1-4 per cent at all airports with immediate effect".

The aviation industry has been significantly hit due to the travel restrictions imposed to curb the spread of the coronavirus within and outside India.

The revenue collected by the states on account of VAT on ATF is an insignificant proportion of the overall state finances, the ministry noted.

"In any case, this will be more than offset by the positive impact of the air connectivity to the state through the flow of economic activities," it added.

Citing the examples of Kerala, Andhra Pradesh, Meghalaya, Nagaland, Sikkim and Telangana, Scindia said these states have brought down the VAT on ATF to one per cent and even below. "As a result, they have seen a substantial jump in the number of aircraft movements in their states," according to the ministry.