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Tax Breaks For Steel, Iron And Aviation, Indian Government Announces

by Mary Swire, Tax-News.com, Hong Kong

04 November 2008


A double dose of good news was handed to India's manufacturing and aviation sectors last weekend, after the government announced that it will go ahead with much-needed tax relief.

In a move designed to reverse the decline of both industries and encourage growth, the government has scrapped the 5% customs duty on Aviation Turbine Fuel (ATF) and removed export taxes on a range of important steel and iron products. The changes were applied with immediate effect, coming into force on November 1, 2008.

The decision to remove the duty on ATF will be welcomed by the aviation industry, which has been warning for some time that it faces a perfect storm of rising costs, of which taxation is a significant factor, and slowing domestic and global demand. However, the industry still faces a myriad of other taxes and charges at state level, with some states imposing tax on aviation fuel at rates of up to 30%.

Last month, India's Civil Aviation Minister, Praful Patel urged both the central and state governments to lower taxes on ATF, after figures revealed that domestic air travel has declined dramatically this year. Patel requested that Indian states follow the lead of Kerala and Andhra Pradesh, which have reduced taxes on ATF to 4%.

Meanwhile, the withdrawal of export duties on certain steel products has also come after a long debate on how best to improve the industry's dwindling output. Under the changes, pig iron, iron and steel ingots, bars and rods, angles, shapes and sections will all be exempt from the encumbrance of export charges. The central government also announced that it has replaced the 15% tax on exports of iron fines with a flat rate duty of INR200 (USD4.11) per tonne.


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