Relief For Indian Aviation: Government Announces Tax Cut On Aircraft Fuel By Over 20 Per Cent

Days after the centre announced a tax cut for petrol and diesel, the Narendra Modi government announced a reduction in excise duty on Aviation Turbine Fuel (ATF) bringing big-time relief to ailing airlines, reported Financial Express.

The excise duty has reportedly come down from 14 per cent to 11 per cent, this means that the effective reduction amounts to 21.42 per cent in taxes. However, the government has increased the customs duty on jet fuel from zero to five per cent in a bid to curb imports to ease the pressure on the current account deficit (CAD).

The decision to cut excise duty has reportedly proven to be an offset to airline companies who are likely face losses due to higher customs duty. The euphoria over the excise duty cuts got reflected in the aviation stocks, a 14 per cent intra-day surge has been today (11 October).

This is the second oil related excise duty cut announced by the government this month. To provide relief to petrol and diesel consumers, the government had announced an excise duty cut of Rs 1.5 a litre on both, while asking oil marketing companies to absorb a loss of Re 1 per litre. Following the decision, several states also announced Value Added Tax (VAT) cut on fuel.

Despite warnings from rating agencies such as Moodys, that said that the government may miss the fiscal deficit target of 3.3 per cent of the GDP, Finance Minister Arun Jaitley expressed confidence in achieving it on the efficient direct tax collections and government’s borrowing estimate cut of Rs 70,000 crore in the second half of the year.