Meghalaya along with Nagaland, Sikkim, Kerala, Andhra Pradesh and Telangana have been mentioned as progressive states that have brought down the value added tax (VAT) on aviation turbine fuel to one percent and even below which as a result has led to substantial jump in the number of aircraft movements in these states.
This was stated by Union Minister for Civil Aviation Jyotiraditya Scindia in his recent letter to 22 states and union territories urging them to rationalise VAT on aviation turbine fuel across all their airports within the range of 1 per cent to 4 per cent. He has asked them to take forward common intention to boost air travel and connectivity with a view to accelerate economic development.
The price of aviation turbine fuel is a major component of the operating cost of airlines with that, the tax on aviation turbine fuel contributes significantly to the aviation turbine fuel price. Addressing this issue would enable a force multiplier effect with regard to air connectivity in states.
Besides, it is worth noting that the revenue collected by the State on account of VAT on aviation turbine fuel is an insignificant proportion of the overall State finances. In any case, this will be more than offset by the positive impact of the air connectivity to the State through the flow of economic activities.
Citing examples of progressive states such as Meghalaya, Nagaland, Sikkim, Kerala, Andhra Pradesh and Telangana, the minister wrote that they have brought down the VAT to one percent and even below and as a result, these states have seen a substantial jump in the number of aircraft movements.
Scindia said that air connectivity directly promotes tourism growth, output growth and employment generation, in addition to various indirect benefits to the economy. In fact, the aviation sector has a high output multiplier of 3.25 and employment multiplier of 6.1.
Presently, there is a huge disparity between states, and even within states, in terms of VAT being levied on aviation turbine fuel.
Given the challenges that have arisen due to Covid-19, Scindia emphasised on the need to reduce the existing VAT/Sales Tax on aviation turbine fuel to 1 per cent or 4 per cent at all airports with immediate effect.
The 22 states and union territories to which the minister wrote include Arunachal Pradesh, Assam, Tripura, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Madhya Pradesh, Mizoram, Rajasthan, Tamil Nadu, Uttarakhand, Uttar Pradesh, Jammu & Kashmir, National Capital Territory of Delhi, Ladakh, Andaman Nicobar, and Dadra and Nagar Haveli and Daman & Diu.
