Jharkhand govt slashes VAT on jet fuel to 4% from 20% high

In a bid to strengthen air connectivity to the state and boost tourism, the Jharkhand government on Wednesday announced it had slashed VAT (value-added tax) on Aviation Turbine Fuel (ATF) to 4 per cent from 20 per cent.

The decision to reduce tax has been taken to increase air connectivity in the state and bring down airfares 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 per cent to 4 per cent," the statement said.

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The notification shall be effective from the date of its publication in the Official Gazette, it said.

This decision is expected to bring down airfares, the statement said, adding "apart from increasing air connectivity in the state, this shall also provide a major boost to the tourism sector".

As many as 23 states have already lowered VAT on jet fuel from highs of 20-30 per cent.

ATF makes up about 40 per cent of the operating cost of an airline. 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.

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.