New Delhi: The price of aviation turbine fuel (ATF) has been raised by 16.3 per cent, to Rs 1.41 per kl ( Rs 123.03 per litre) in the national capital, according to a price notification of state-owned fuel retailers. ATF makes up for about 40 per cent of the operating cost of an airline that has surged to new highs this year. ATF prices have increased every fortnight since the start of 2022. The hike in ATF fuel impacts the air ticket fare as airlines pass on the higher expense to customers.
However, on June 3 the price was slashed by 1.3 per cent in a first reduction after ATF prices witnessed 10 rounds of hike. Jet fuel prices are at a record high in line with the global surge in energy prices. And since India is dependent on imports to meet its oil needs, the only way to cut jet fuel prices is to reduce taxes.
Meanwhile, the Jharkhand government on Wednesday announced reducing VAT (value added tax) on ATF to 4 per cent from 20 per cent, reported news agency PTI. The decision to reduce tax has been taken to push air connectivity in the state and reduce airfares with an aim to boost tourism, a statement by the state government said.
“The State Government will amend serial number one of Schedule- II Part-E of Jharkhand Value Added Tax Act, 2005 in order to improve the air connectivity in the state. Under this, the tax rate on Aviation Turbine Fuel (ATF) will be reduced from 20 percent to 4 percent,” the statement said.
The Notification shall be effective from the date of its publication in the Official Gazette, it said.
More than 23 states have already lowered VAT on jet fuel from highs of 20-30 per cent. ATF presently is chargeable at an 11 per cent ad valorem rate of excise duty. A concessional rate of 2 per cent is applicable for ATF sold under the Regional Connectivity Scheme.
Ad valorem rate means the incidence of taxation rises whenever there is an increase in the base price. ATF attracts both excise duty of the central government and sales tax or VAT of states.