Improving Competitiveness in India

India’s air transport sector accounts for 0.5% of the country’s GDP and supports 1.7 million jobs according to Oxford Economics study ‘Economic Benefits from Air Transport in India’ (pdf). Aviation’s contribution to the Indian economy could be even greater if the tax burden placed on the industry were reduced, including

• Service tax on air passenger tickets, ANS charges, airport charges, and airport services such as ground handling and fuel
• Taxes on jet fuel, including a central excise duty (8.24% including cess, a 3% tax on sales tax) and state sales taxes as high as 30%

The Indian Union budget for 2012/13, further increased service tax from 10.3% to 12.4%. Although the government has offered an abatement of 60% on the passenger ticket tax, the overall burden, particularly on economy class travel, would increase significantly because the cap can easily be removed.

IATA continues to urge the Indian Government to

• Remove service tax where it impacts aviation, in particular the passenger ticket tax in clear contravention of ICAO policies.
• Give ‘declared goods’ status to jet fuel to reduce the sales tax applied on it to a uniform rate of 4% across India.
• Revoke the central excise duty on jet fuel.

Indian Airport Charges Developments

Delhi Airport (DIAL)’s original proposal to increase airport charges by 780% has been reduced to 340% by India’s Airports Economic Regulatory Authority (AERA). Even at this rate, Delhi would still become the most expensive airport in the world.

IATA has been lobbying strongly for the increase to be moderated by spreading the revenue clawback period from two years to seven years. DIAL’s cost allocation is currently heavily skewed towards aeronautical activities and its airport concession agreement needs to be reviewed to allow the 46% revenue share payable to Airports Authority of India to be channelled towards offsetting aeronautical costs.