Telangana set to slash tax on jet fuel to 4%; move to make H’bad attractive as a base for airlines
In order to make Hyderabad an aviation hub, Telangana government is slashing taxes on airline fuel – a step that is expected to lure airlines into moving a bulk of their operations to the city.
The value-added tax currently stands at 16% on jet fuel and slashing it to 4% will make Telangana among the few Indian states to do so. States that reduced tax on jet fuel include Orissa, Gujarat, Madhya Pradesh, Chhattisgarh and West Bengal.
According to government expectation, this move helps Hyderabad to attract players in the Indian aviation sector, which is going through turbulent times, to choose the city as the centre for their operations.
The Telangana government’s resolve to slash ATF taxes comes at a time when the Karnataka government is also reportedly looking at cutting taxes on jet fuel to 4%. Recently, low-cost airline AirAsia moved its base to Bangalore from Chennai.
“The in-principle decision to slash taxes on ATF is primarily aimed at attracting low-cost airlines to move their base to Hyderabad and promote the city as an aviation hub so as to drive economic activity and attract investments into the new state,” a senior Telangana cabinet minister said on condition of anonymity.
He said “a formal announcement on this is expected shortly. “ Kapil Kaul, South Asia CEO at the Centre for Asia Pacific Aviation, said the Telangana government’s decision on ATF taxes would make GMR Hyderabad International Airport turn more competitive. “The competition among southern airports is intense and Telangana’s decision will be followed by other southern states,” said Kaul.
The Union government has been urging state governments to bring down taxes and surcharge on aviation fuel.
The Indian civil aviation industry in its pre-budget memorandum, had appealed to the NDA government to include jet fuel in the “declared goods“ category so that the sales tax on it comes down to around 4%. The Telangana government has estimated the immediate tax loss with the decision to be about Rs.100 crore but hopes the move will have a sizeable positive impact on its economy.
“The Telangana government views that the move to slash taxes on ATF would help improve air connectivity and brand Hyderabad, which would have significant positive impact on several key sectors,” said the minister quoted above.
The Telangana government, which fruitfully attracted the joint venture of Tata group and Swiss aerospace and defence firm RUAG Aviation to establish aircraft manufacturing facility involving Rs.1,000 crore of investment last month, is now looking at attracting more aerospace investments.
“The state government views that growth in air connectivity and aviation would also drive the capital and manpower-intensive maintenance, repair and overhaul industry to Hyderabad, which contributes significantly to the exchequer,“ said the minister.