Service Tax - Don't tax overflight charges - IATA
INTERNATIONAL Air Transport Association (IATA) has called for the development of a comprehensive policy for aviation aligned with the Indian Government's stated intention to make it easier to do business in India. The objective is to allow India to derive maximum social and economic benefits as its aviation market grows to become the third largest in the world. That is expected to happen in 2029 when the number of travelers to, from and within India will near 280 million annually.
Already aviation and aviation-related tourism support 7 million Indian jobs and USD 23 billion of India's GDP. The healthy growth of the sector has the potential to expand these benefits tremendously. But there are immense challenges which must be overcome—as seen in the sector's financial performance.
Delivering a keynote address at the Aviation Day India, IATA Director General and CEO Tony Tyler highlighted three priority areas where work is needed to reduce costs in India:
Reducing the Tax Burden: The true value of aviation to the government's coffers is its ability to catalyze economic activity. Focusing on receipts through a layered web of taxes does a disservice to the country's economic potential. There has been a Tribunal decision on the application of Service Tax to the fees of Global Distribution Systems. It confirmed the principle that the tax should not apply to services rendered outside of India. So why aren't all payments for services that don't touch Indian soil - including overflight charges and extra baggage fees unequivocally exempted by the same principle? And, in line with international standards, international tickets should also be exempt from the Service Tax. And Service Tax should not be applied to taxes and charges collected—effectively being applied as a tax on a tax. Looking ahead, the incoming GST regime should also zero-rate international air transport services in line with OECD guidelines. And on top of this, it's time for India to implement standard double taxation provisions that would see profits from international services taxed only in the location where the airline has its head office. We are not trying to avoid taxes, but airlines should not have to pay twice!
Competitive Fuel Pricing: State taxes on jet fuel can be exorbitant - as high as 30%. Granting jet fuel "declared goods" status would be a good start to addressing this far too onerous burden. Simultaneously, it was a good decision to introduce competition in jet fuel supply at some key airports including Delhi, but what about opening access to the pipelines that get the fuel to the airport? The efficiencies of a liberalized market cannot be realized unless all fuel companies have access to key off-airport infrastructure that brings fuel onto the airport site.
Allowing AERA to do its work: Let the Airports Economic Regulatory Authority (AERA) to do its work independently.
The IATA Chief had a strong message for India: "I have been in aviation for nearly four decades. I am passionate about what aviation makes possible. I have seen it change lives for the better and improve prosperity in nations where the industry finds a supportive home."
He told the aviation Minister Ashok Gajapathi Raju, "All this gives me the confidence to say that you have the most exciting job in the Indian Cabinet today. The combination of your leadership, a determined government focus to make it easy to do business and the pent up demand for connectivity to this amazing sub-continent is an opportunity not to be missed."