The government is in talks with the oil marketing companies (OMCs) to pass on the benefits of falling crude oil prices to the airline companies
To help airlines reduce their losses, aviation ministry is believed to have approached finance ministry to consider bringing aviation turbine fuel (ATF) under the goods and services tax (GST) regime. Furthermore, a plea to bring uniformity in availing the input tax credit has also been put forward.
Government sources have said that Ajay Singh, managing director of SpiceJet and Jeh Wadia, managing director for GoAir airlines met the aviation secretary on November 29 to put forward the industry’s concern regarding mounting losses.
Sources told Moneycontrol that while it is up to the airlines to micro-manage their respective income and yield from their services, the government could look at providing support through ATF and input tax credit.
Another person aware of the development said that government is in talks with the oil marketing companies (OMCs) to pass on the benefits of falling crude oil prices to the airline companies.
From record high of $86 a barrel in October, crude oil has slipped by about 30 percent to $59 a barrel.
Majority of airlines have been in red due to rising jet fuel prices and falling rupee. According to data by rating agency ICRA, “average jet fuel prices have witnessed an increase of around 35 percent during April-November this year over the same period last year even as the average rupee depreciated by 7.8 percent against the US dollar during this period”.
For the quarter ended September 2018, listed airlines such as Interglobe aviation run IndiGo posted a net loss of Rs 652.13 crore, SpiceJet posted a loss of Rs 389.37 crore and Jet Airways posted loss of Rs 1,297.46 crore.
Moneycontrol had reported earlier this week that petroleum products like ATF and natural gas could be brought under GST.
“Among petroleum products, ATF and natural gas are easier candidates for inclusion under GST. It will be taken up and approved by the (GST) Council as early as possible,” a senior government official had told Moneycontrol.
Aviation sector has long been waiting for the ATF to be included in the GST regime, which presently, attracts Centre’s excise duty plus value added tax (VAT) levied by states individually. The request, however, has not received assent from the finance ministry owing to huge revenue implications.
As far as input tax credit in concerned, the airlines are requesting for uniformity in the way credit is being given.
“When an aircraft is treated (repair treatment) within a country, it’s treated as a service which attracts full ITC… However, when it’s treated abroad, it is treated as goods for which they don’t get full ITC,” a source said.
The source also said that 100 percent ITC is only available for business class but not for economy class, which is a concern for the industry.
According to people in the know, the government has assured the industry of helping for only “structural economic situations” and not for individual reasons.
“The government would help them for all the things that are structurally affecting them due to economic conditions,” said a government source adding that Centre is of the view that as of now, nothing structural has affected the aviation industry.
“It is largely their ability to pass on their costs in a competitive environment,” they said.