Indian Aviation Industry Seeking Tax Relaxations in Upcoming Budget

Indian Aviation Industry Seeking Tax Relaxations in Upcoming Budget

With the 2021 Budget looming, the Indian aviation industry is expecting some tax sops and a wide-range of measures to ease the financial difficulties caused during the coronavirus pandemic. 

Though domestic flights have resumed, its impact is being felt throughout the sector. Experts in the aviation industry are reportedly seeking a reduction in airport charges, overnight fees, the extension of lower rates for withholding taxes, excise duties on fuel as well as bringing aviation fuel under GST (Goods and Services Tax). 

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According to experts, the budget should focus on the extension of the lower rate on withholding taxes, which was decreased to 25 per cent of the standard rate. As per them, this should be extended for another year till the market has fully recovered as it will help increase liquidity. Another area of focus should be the lowering of the income tax rate for travel companies.

Furthermore, there are also demands in regards to GST for the travel industry be limited to 5 per cent for travel via private or commercial flights. According to experts, this move will “decrease the costs of travelling for people who don’t get GST benefits and will be a boost for the economy".

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Indian airline companies are expected to report losses upwards of ₹21,000 crores for the fiscal year given the lack of travel due to a sharp decline in user interest coupled with local restrictions. 

Credit rating agency ICRA Ltd said in a report published last month that the aviation industry will require additional funding of ₹37,000 crores during the fiscal year 2021 to 2022 in order to recover its credit rating and cushion itself from losses and debts. The report went on to say that the debt in the industry is expected to go up to ₹50,000 crores which does not include the lease liabilities that will reflect by the fiscal year 2022. 

“Sops rolled out by the government last year during the peak of the pandemic will help the sector in the long run but we are in need of urgent short-term measures, which could help aviation bounce back. Several proposals by the industry, such as easing requirements for airlines to operate flights on remote and loss-making routes, and a free hand in ticket pricing, which were earlier rejected, should be considered,” a senior airline official said under the condition of anonymity.

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