Delhi cuts VAT on ATF to 1% for regional flights; other states to announce the same soon

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The Delhi government today announced reduction in Value Added Tax (VAT) on jet fuel for regional flights flying out of Delhi airport.

Delhi’s deputy chief minister and finance minister Manish Sisodia announced that VAT on ATF for regional flights will now be charged at the rate of 1 per cent from earlier 25 per cent in Delhi.

The request for reduction was made by the aviation ministry in February this year. According to Centre’s directive under regional connectivity scheme, other state governments will also have to reduce the VAT to 1 per cent on jet fuel

The reduction has been announced after Union civil aviation minister Ashok Gajapati Raju had written to the Delhi government and Lieutenant General for a reduction in VAT for regional flights.

“The government of NCT of Delhi has imposed a VAT of 25 per cent from November 16, 2015, which is one of the highest in the country, whereas state governments are required to reduce VAT to 1 per cent or less for a period of ten years under RCS (Regional Connectivity Scheme). It is appropriate to indicate here that revenue loss on account of VAT on ATF will be notional, as there is no RCS flight touching Delhi at present… I request for your favourable consideration for reduction of VAT on ATF for 1 per cent or less for the RCS flights to and from Delhi,” Raju had said in his February 9, 2017 letter to lieutenant government, which was seen by ET.

Under RCS, announced by the Union government, airlines will offer flights at a fare of Rs 2,500 for per hour of flight.

Airlines welcome this reduction, as it would provide an impetus to regional connectivity scheme.

“I understand that this relief is only for the Regional Connectivity Routes. While this is a welcome move and will provide the much needed impetus to the RCS, we do request that this tax break is broadened to all air travel out of Delhi as it will allow IndiGo to provide even more affordable air travel to millions of our customers out of Delhi, which is our biggest base of airplanes,” Aditya Ghosh, president and whole-time director, IndiGo, said in a statement.