Last week, the Administrative Council (AC), which met here under the chairmanship of Lieutenant Governor, announced to reduce the Sales Tax on Aviation Turbine Fuel to one per cent. Hitherto, K&K charged 26.5 per cent on sale tax on ATF. The ATF accounts for nearly one-third of the total cost of running an airline. According to reports, one of the main reasons for the sharp rise in jet fuel prices is the firming up of both product and crude price on demand rise amidst the slowdown of the pandemic. The high level of taxes was keeping the rate higher.
While the government said that the decision is part of slew of measures taken by it recently to promote air traffic to Jammu and Kashmir, Civil Aviation Minister Jyotiraditya Scindia heaped praises on the administration. He termed the decision as a ‘new dawn’ for air connectivity in the region. Lower operational costs for airlines has a causal effect on flight connectivity. With the reduced airfare on account of reduction in Sales Tax on ATF, the air-traffic is expected to increase which will boost both tourism and economic activities.
Besides drastic reduction in sales tax on ATF, the government extended air strip at Jammu Airport and consequently, airlines were allowed to operate flights to full capacity. Additionally, late evening flights were allowed both at Jammu and Srinagar Airports. These measures are expected to ensure affordable airfares for flights operating to Jammu and Srinagar airports as per the government.
Given the disruption caused by the pandemic, it is important for government to bring the sector back on track and trigger greater economic activity
The aviation industry is counted among the most impacted among all sectors because of the covid-19 pandemic. The losses have become unmanageable, especially for domestic airlines as they operate on very thin margins.
While the government decision is in line with the Civil Aviation Ministry’s urge to several states and UTs which levy a high sales tax on aviation turbine fuel (ATF) to slash them, it is perhaps in the right direction. Also it is true that the Civil Aviation Ministry urge was not binding on J&K, hopefully it will stabilize the airfares as it will reduce the burden on airlines. The government is also expected to take all steps required in the direction towards stabilizing the airfares and increased connectivity.