 "Delhi govt hikes VAT rate on jet fuel")
Domestic airlines will have to shell out an extra for jet fuel at Delhi following a five% increase in the value added tax levied by the state government.
With the revision in rates effective November 17 a kilolitre of jet fuel in Delhi costs 44,846 per kilolitre a hike of almost Rs 1,795 over the earlier price. The tax rate has been increased from 20 to 25%.
The state government decision will burden domestic airlines as Delhi is a key base for them. A SpiceJet spokesperson said the airline will not pass on the hike and there was no plan to increase fares. Other airlines did not respond to email query on the topic.
Aviation turbine prices are almost 30% lower now on a year-on-year basis and this has helped the airlines to improve their profitability. However lower fuel prices has resulted in lower tax collection for the state government and this has led the government to revise the rates.
"The move does not augur well for Delhi airport. The decision is in contrast to the increasing trend amongst state governments to reduce the tax and encourage aviation. Andhra Pradesh and Madhya Pradesh have cut the VAT on jet fuel to 1% and 5% respectively. Centre should seriously consider including aviation turbine fuel in the category of declared goods which will result in an uniform tax of four% across the country," said aviation expert Anurag Jain.
"Delhi government's decision is unfortunate and reflects that aviation is not a priority for government," said Kapil Kaul of Centre for Asia Pacific Aviation.
In FY 15 Delhi airport handled 41 million passengers which included 27.5 million domestic passengers. Nearly 20% of all domestic traffic in India was handled by Delhi last year.