The Indian aviation sector is currently facing many global and economic challenges. In such a situation, the country’s major airlines Air India, Indigo and SpiceJet have made a big request to the government to improve their financial condition. Federation of Indian Airlines (FIA), the organization representing these airlines, has written a letter to the Ministry of Civil Aviation demanding to bring aviation turbine fuel (ATF) under the purview of Goods and Services Tax (GST) as soon as possible. Airlines believe that this historic step will lead to a major reduction in their operating costs, which can directly benefit the air traveling public in the future.
At present, different states of the country levy their own heavy excise duty and VAT on jet fuel. According to FIA, extraordinary challenges like rising geopolitical tensions due to the Middle East crisis, airspace restrictions and devaluation of the rupee against the dollar have broken the back of airlines. Due to these circumstances, the share of fuel alone in the total operating cost of airlines has increased from 30-40 percent earlier to 55 to 60 percent now. Due to such expensive costs, operating flights at present is proving to be extremely economically disadvantageous for Indian aviation companies.
Demand for 5% GST with Input Tax Credit (ITC)
Apart from fuel, airlines are also facing rising rates of other ancillary operating expenses such as polymers, petrochemicals, engineering materials, airport services and logistics. In view of this critical financial situation, FIA has requested the Ministry of Civil Aviation to take up the matter with the concerned ministries and stakeholders. Airlines want jet fuel to be included in the minimum 5 per cent GST slab with full input tax credit benefits, which is extremely important for the sector.
What will be its impact on the general public and aviation sector?
If the government brings jet fuel under the ambit of 5% GST, there will be a huge decline in the operating costs of airlines companies. If costs reduce, companies can pass its direct benefit to air passengers in the form of cheaper fares. At the same time, implementation of uniform tax system across the country will provide financial stability to the aviation sector, due to which airlines will be able to expand their services in a better way.
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SK Sharma is a content writer who writes on news, entertainment, and lifestyle topics. She has over four years of experience and is known for conveying information in simple and clear language.
