• Gennette Cordova

India considers lowering state taxes on jet fuel

Various state governments in India said they will consider lowering state taxes on jet fuel, according to notes from a high-level meeting held Monday between civil aviation minister Hardeep Singh Puri and representatives of various state governments.

The tentative plans would assist Indian airlines in grappling with high fuel prices, the largest roadblock to growth for the nation’s carriers. According to Telegraph India, aviation turbine fuel (ATF) has an excise tax of 11%, with states piling on an additional value-added tax (VAT) of up to 30%. This accounts for nearly 40-50% of airlines’ operating costs and makes fuel prices in the country higher than anywhere else in the world.

“ATF prices will continue to be the game changer in 2020. The government must consider lowering the high rates of taxes being imposed on ATF, thereby easing margins for operators," said Ankur Bhatia, executive director of Delhi-based travel technology and aviation services conglomerates, Bird Group, in an interview with Indo-Asian News Service.

Although India is one of the world’s fastest-growing aviation markets, 2019 has been a tumultuous year with the shuttering of the country’s oldest private carrier Jet Airways and Air India’s financial struggles. Despite this, growth is still expected and slashing states’ taxes on ATF would support domestic airlines in sustaining their commercial operations and ensure expansion in 2020.

While visits from foreign tourists continue to grow steadily, domestic tourism has contributed significantly to the growth of aviation sector. According to the India Times, “domestic tourist visits have been growing at an astonishing pace in recent decades. In 2000, there were 220 million domestic tourist visits. The number has grown almost nine-fold to 1.82 billion in 2018.” Continued improvements in tourism infrastructure at religious sites around the country led to a growth spurt in religious tourism.

Additionally, Boeing estimates Indian airlines will order up to 2,380 planes over the next 20 years and most airlines such as IndiGo, Vistara, SpiceJet and Air Asia India have ambitious fleet expansion plans.

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