New Delhi: Civil Aviation Minister Praful Patel asked the Finance Ministry to rationalise tax structure for the aviation industry, which has been hit hard by rising jet fuel prices, in the Budget for 2008-09.
In a pre-Budget meeting with Finance Minister P Chidambaram, Patel also pitched for tax rebate on mergers given to newly-merged Air India for the entire sector, and withdrawal of service tax on high passenger fare.
"I feel the impact of ATF price hike is something which needs to be addressed by the government. This, coupled with higher taxes at the central and state level, is having serious impact on the viability and financial health of the aviation sector," he told reporters after the meeting.
According to Federation of Indian Airlines statistics, Aviation Turbine Fuel is the largest component affecting airfares. It makes up 40-45 per cent of the operating costs of Indian carriers against 20-25 per cent for overseas carriers.
Patel said the recent tax rebate given to the newly- merged Air India should be extended to the entire aviation industry as M&A activities will increase in the future.
"Tax rebate was given to the merged entity of Indian Airlines and Air India under Section 72 (A) of the Income Tax Act. This should be extended to the entire industry as mergers are going to take place in the industry in future," he said.
Patel also sought withdrawal of service tax on First Class and Business Class air tickets, saying this was putting domestic airlines in a disadvantageous position vis-à-vis foreign airlines on whom this tax was not levied.
"IATA (International Air Transport Association) has been telling us that India is the only country where this tax exists," Patel said.
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