Terming taxes on Aviation Turbine Fuel (ATF) as significantly higher than the tax rates in other countries, a report submitted to the Civil Aviation Ministry has called for change in taxation of ATF from ad valorem tax to a specific tax or classifying ATF as a ``declared good’’ which will lower taxes on the airline fuel 4 per cent.
In a report ``Aviation Turbine Fuel in India – Examination of pricing and Tax Regime Governing ATF’’ conducted by Chennai-based Nathan Economic Consulting India Ltd, it has argued that the country should follow the Chhattisgarh model which has reduced the rate on ATF to 4 per cent and now enjoys both economic growth and gross tax revenue benefits. It suggested that ATF taxes should be brought down to manageable level by either changing it from ad valorem to specific tax (charged on volume not value of the product). ``Another solution would be to classify ATF as a ``declared good’’ which will lower local taxes on ATF to 4 per cent, identical to the tax rate of Chhattisgarh,’’ the report said.
In India, if a commodity is given ``declared good’’ status, the good is subject to a significant reduction in VAT. In the long run, taxation on ATF should be incorporated into GST when the new tax system is adopted by the country, it said.
On the issue of fees charged at India’s airports, it said these are much higher than at other regional hubs. When compared to other regional international hubs, India’s add-on fees make up a much more significant percentage of the international benchmark ATF prices. India’s high add-on fees are one of the major contributors to the high ATF price. ``AERA, Airport Authority of India (AAI) and private airport operators should work together to come up with 3 price cap for add-on fees with respect to ATF. The capped fees should be calculated keeping in mind the cost of operation of the particular fuel related facilities, but should not depart from regional add-on fee trends. While developing price cap and cost assessment standards, AERA and AAI should give time and space for ample consultations with stakeholders,’’ the report has stated.
It has also suggested application of fuel related open access principle already established in Bangalore, Hyderabad and Delhi international airports to other airports in India in order to ensure open access and competitive ATF supply market.