Telangana to Slash Airline Fuel Tax to Make Hyderabad an Aviation Base

The Telangana government is planning to make Hyderabad a base for low-cost airlines by slashing sales taxes on airline fuel. Bringing down sales tax on Aviation Turbine Fuel (ATF) will encourage more airlines to set up base in Hyderabad, add more air connectivity, drive more economic activity and promote tourism in the state.

The value-added tax on jet fuel currently stands at 16% and slashing it to 4% will make Telangana among the few Indian states to do so. States that reduced tax on jet fuel include Gujarat, Orissa, Madhya Pradesh, Chhattisgarh and West Bengal. The ATF slash could be clubbed with other promotion programs which would aim at increasing the aviation activity by encouraging the airlines’ throughput. Similar exercise in Bangalore attracted AirAsia to move base from Chennai to Bangalore. States that already reduced tax on jet fuel include Gujarat, Orissa, Madhya Pradesh, Chhattisgarh and West Bengal. 

Many aviation experts are of the view that airport taxes in India were as much as their airfares. ATF is one of the highests in India when compared to other regional hubs like Singapore and Malaysia. ATF accounts for nearly 40% of the operations costs of an airline. Marar reasons that the reducing of ATF to 4% would have a 11% impact on airline’s cost structure.

Telangana Government may lose 100 Cr with the tax slash but hopes to get sizable long term returns on its economy. An announcement is expected soon.