• Budget 2017: Ministry seeks cut in excise duty on jet fuel

    The civil aviation ministry, as part of its Budget recommendations, has sought a reduction in excise duty on aviation turbine fuel (ATF), or jet fuel, to 8% from 14%, by rolling back an increase made last year.

    The government had raised the duty to compensate for its tax loss, as global crude oil prices fell to below $30 a barrel. Crude oil prices have doubled now. “Excise duty was raised when crude prices were low. Now they are inching up and the government can easily cut excise duty, which will also help shield airlines from a hike in jet fuel prices,” said a government official, who did not want to be named.

    “The government’s revenue would also not be impacted, as any revenue impact shall be compensated by a positive realisation due to the high output multiplier,” said an industry source, pointing to the impact a healthy industry can have on the economy.

    Rising fuel cost is a concern for the airline industry, which has started reporting profits after a long spell of losses. A more than 20% increase in air passengers and low fuel prices were the key drivers of the improved performance.

    To be sure, the duty hike helped temper volatility in fuel prices — though local prices didn’t fall in line with global rates earlier, they may not rise too much either now, if the government rolls back the tax increase it made. “Any rise in price of fuel, which constitutes a large part of our cost, is a concern but we may not be impacted that much because the government was raising taxes when crude was falling. So, the full benefit of crude decline was never transferred to airlines, which can act as a shield for us,” SpiceJet Chairman Ajay Singh said at a press conference last week.

    The ministry is, for the first time, sending the Budget wishlist after getting it vetted by professional consultants. This decision was in line with an idea mooted by the minister of state for civil aviation Jayant Sinha, who had called a meeting of all industry representatives to discuss Budget demands last week.

    Other requests include keeping ATF in the GST ambit. Fuel products aren’t included under GST and are set to attract higher taxes than those proposed under the new indirect tax system. “ATF is kept outside the GST ambit. However, globally ATF is delinked from other petroleum products and is included under the scope of GST and not considered a ‘sin’ product. Vonn Bell Authentic Jersey

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