Aviation sector to seek fuel tax rationalization

The wish list of the domestic aviation sector from the Union Budget 2008-09 would be communicated to the Ministry of Finance on January 16 at a meeting the Minister for Civil Aviation, Mr Praful Patel, would have with the Finance Minister, Mr P. Chidambaram.Official sources said that the issue of rationalising taxes and duties on aviation turbine fuel (ATF) and providing income tax relief by extending the benefits of carry-forward and set off accumulated losses and unabsorbed depreciation to private sector airlines going in for merger or acquisition would be the key issues to be raised.“Domestic airlines pay 70-90 per cent more than what is charged in international airports around the world. This is a major burden as ATF constitutes 40-45 per cent of the operating cost of domestic airlines. With the global increase in fuel prices any rationalisation of taxes would help the industry,” an official said.

I-T benefits

In addition, private sector airlines would look at getting the benefits of Section 72-A of the Income Tax Act so that the accumulated losses and unabsorbed depreciation of the amalgamating company or companies will be set off against the profit of the amalgamated company. Such a move would help the Kingfisher Airlines buy out of Air Deccan as also the merger of Jet Airways and Air Sahara. During Budget 2007-08, the Finance Minister had amended provisions Section 72-A of the Income Tax Act, thereby facilitating the merger of Air India and Indian. Industry will also be looking at whether the Budget would remove the service tax on first and business class international air tickets. Sources said that the imposition of the service tax would affect chances of India becoming a global aviation hub as passengers would prefer to transit through neighbouring airports rather than bear additional costs for travelling to Indian airports. – www.thehindubusinessline.com