Nathan India Recommends Changing How Aviation Fuel is Taxed in India

Location: India

May 31, 2012—As reported in the May 24 edition of The Hindu, Nathan India’s study—Aviation Turbine Fuel in India-Examination of Pricing and Tax Regime Governing ATF—concludes that taxes and fees related to aviation turbine fuel (ATF) are much higher in India than in other countries and should be lowered to improve the health of the country’s aviation industry.
 
The report recommends lowering taxes on ATF by

• Replacing the value added tax with a tax based on volume not value, or
• Classifying ATF as a declared good as was done in Chhattisgarh.

Nathan’s analysts favor the second option—the taxation model used in the state of Chhattisgarh, which reduced the local tax rate on ATF to 4 percent and is consequently enjoying both economic growth and higher gross tax revenue. The report also recommended that

• The ATF tax eventually be incorporated into the Goods and Services Tax (GST),
• Airport fees—which in India account for a much greater share of the international benchmark ATF price—be lowered, and
• The fuel-related open access principle of the Bangalore, Hyderabad, and Delhi international airports  be applied at other airports to ensure open access and a competitive ATF supply market.

The study of ATF pricing and taxes is Nathan India’s second study for the Ministry of Civil Aviation.

Read the article in The Hindu: http://www.thehindu.com/business/Economy/article3452194.ece