Taxes Holding Back Indian Aviation

by Lorys Charalambous, Tax-News.com, Cyprus

26 September 2008

The International Air Transport Association (IATA) has urged the Indian authorities to relieve the tax burden on the country's hard-hit aviation sector which, like the industry globally, is struggling to come to terms with soaring fuel costs and plummeting demand.

“India is among the most expensive places on the planet to buy aviation turbine fuel (ATF)," IATA Director General and CEO, Giovanni Bisignani, told the Confederation of Indian Industry in an address on September 24.

"In August, it was 58% more expensive to buy fuel in Mumbai (for domestic flights) than in Singapore (for international). Excise duties, throughput fees charged by airport operators and state taxes of up to 30% for domestic flights result in a cost structure that cannot support a competitive industry," he went on to observe.

Bisignani warned that Indian carriers could post USD1.5 billion in losses in 2008, the largest outside the US, and he said that urgent action is needed to help Indian carriers weather the "perfect storm" of high costs and falling demand.

Removing excise tax would be one way to achieve this, Bisignani argued, as would implementing a standard 4% state tax for domestic fuel.

Bisignani also said that India’s Service Tax on premium class tickets, and its overflight, landing and airport charges could be illegal under international aviation law.

“Taxing overflight charges breaches India’s international obligations under the Chicago Convention. Taxing premium class tickets and airport charges is contrary to the International Civil Aviation Organization’s (ICAO) resolution 8632 calling for reductions in taxes," he claimed.

"These are embarrassments for a country that is a long-standing member on the ICAO Council," Bisignani remarked.

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