SpiceJet shares hit upper circuit for the second consecutive dayImage Credit source: ai generated
A big news related to aviation sector is coming in the stock market. There has been a tremendous rise in the shares of SpiceJet for the second consecutive day. Today, on April 22, the company’s shares again touched the upper circuit of 5% and were locked at Rs 14.62. There is a big reason behind this stormy boom. Actually, there is talk that the government is planning to give big relief to the airlines companies. If tax cuts are announced for this sector, which is struggling with high fuel prices, then not only the days of companies like SpiceJet can change, but the market and passengers can also benefit from it in the future.
The ‘secret’ behind continuous growth
Amidst the ups and downs in the stock market, SpiceJet’s performance is attracting the attention of investors. Since the beginning of this month, the stock of this airline has seen a spectacular rise of 50.1%. However, this relief may seem inadequate for long-term investors, because if we look at the record of the last one year, the stock is still trading at a huge loss of about 70.6%. Interestingly, while on one hand the stock of SpiceJet is touching the sky, on the other hand the investors of the country’s largest airline Indigo are slightly disappointed. At the end of trading, Indigo shares fell 0.81 percent and closed at Rs 4,655.00.
Will the aviation sector get government help?
According to a news from Money Control, the Civil Aviation Ministry is in talks with the state governments. The main agenda of this important discussion is to reduce the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF). A large part of the total expenditure of any airline company goes on air fuel i.e. ATF. In such a situation, if the tax is reduced, there will be a direct and positive impact on the balance sheets of the companies.
Heavy tax burden in different states
In the current system, tax rates on aviation fuel are different in every state. This discrepancy is a big challenge for airlines. For example, in the country’s capital Delhi, about 25 percent VAT is charged on ATF. At the same time, in Tamil Nadu this figure is close to 29 percent. Even in states like West Bengal and Maharashtra, airlines have to pay about 18 percent tax on fuel. This is the reason why the government is now preparing to reduce this burden for airlines across the country.
Brainstorming on two important options for relief
If sources are to be believed, the government is currently deeply considering two main options. The first option is to make a temporary reduction in VAT for a fixed period of three to six months. This will provide immediate relief to those airlines which are currently struggling with high expenses. Another option is to reduce taxes at airports according to traffic. This simply means that the busiest airports like Delhi and Mumbai, where fuel consumption is the highest due to the highest number of flights, should be given special exemption in VAT.
If these proposals get the green signal from the government, it will have a direct impact on the costs of the airlines. For airlines like SpiceJet, which have been facing financial pressure for a long time, this step will be no less than a lifesaver.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
