Big decision of Rekha government.
Rekha Gupta government of Delhi has decided to reduce the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25% to 7%. The government claims that all passengers and airline companies will benefit from this decision. Earlier, Maharashtra had made a similar tax cut, after which the airlines there got a lot of benefit and the number of flights also increased.
Let us tell you that due to the ongoing tension in West Asia, fuel prices are skyrocketing across the world. In such a situation, this step of Delhi government can make air travel a little cheaper. The high VAT on fuel in Delhi has been a major problem for airlines for years. For this reason, flights are expensive and there is a fear of increasing the prices of air tickets.
It is believed that due to the high cost of ATF and VAT, the number of passengers is currently less at the airport. In such a situation, this decision of Delhi government will give some relief to the airline companies. It can also increase the number of passengers at the airport.
Negotiations on this issue are now in the final stage
Airline industry experts have been advocating for a long time to reduce taxes, so that airlines can get financial strength and Delhi maintains its competitiveness as an aviation hub. Now the Delhi government’s decision will benefit not only the passengers but also the airline companies. However, the reduced VAT rate from 25% to 7% will initially be implemented for a period of 6 months.
What appeal did the Central Government make to the states?
The Union Aviation Ministry had been appealing to the states for a long time to reduce VAT on ATF. The Center believes that during the global crisis, additional tax pressure on airlines should be reduced. It is important to keep the domestic aviation network stable. The burden of rising fares on passengers should be reduced.
Central government has given many reliefs
The central government has already taken many relief measures. Initiatives like fixing ATF prices for domestic operators, reducing airport charges and emergency credit linked scheme have been taken. Despite this, VAT remains a major cost at the state level, ranging from 4 to 30 percent in different states. However, BJP ruled state governments have now started cutting ATF and VAT. At the same time, this step of Delhi government will increase the competition of local airports compared to neighboring states. This will make air travel in Delhi cheaper and easier.
What difference will the reduction in tax on ATF make?
ATF accounts for the largest share in the total operating expenses of airline companies. Sometimes this amounts to 35-40% of the total cost. In such a situation, the cost of airlines may reduce due to reduction in VAT. Domestic flights will get relief. The sharp increase in fares can be controlled. The airline sector will get support in times of crisis.
