AP takes VAT on ATF to new heights

AP takes VAT on ATF to new heights

9:57 PM
In a move that could erode Hyderabad's competitive edge in aviation — it had one of the lowest value added tax (VAT) on aviation turbine fuel (ATF) at 4% — the state government hiked it to 16% on Wednesday. "The hike will come into effect from Feb. 1," principal secretary (revenue) Asutosh Mishra said.

It may be recalled that the late CM Y S Rajasekhara Reddy, in a bid to attract more traffic to the just-opened GMR Group-operated Rajiv Gandhi International Airport at Shamshabad in March 2008 had announced that VAT on ATF would be 4%. This move resulted in many airlines making Hyderabad a refuelling hub which also translated into an increase in traffic. Elsewhere in the country, the tax is an average 20%.

The hike comes as part of the state's drive to enhance various taxes to shore up its dwindling revenues. Mishra said that the hike would add approximately Rs 150 crore to the state revenue.

The AP government is facing a shortfall of over Rs 10,000 crore in revenue this financial year. Consequently, it enhanced VAT on various items from 12.5 to 14.5 per cent recently and has now hiked the tax on ATF as well. All these measures are expected to yield an additional revenue of about Rs 6,000 crore to the state, according to official sources. On the impact on the industry, Kapil Kaul, subcontinent CEO of Centre for Asia Pacific Aviation (CAPA), an aviation research and consultancy, said: "It's a retrograde step and a disincentive to the industry. While it may not make a huge impact on the traffic, it will act as a disincentive in the development of Hyderabad as a regional hub for which huge investments have been made. Also, this gives a feeling that governments still do not see aviation as an economic enabler."

A GMR Group spokesperson said the impact will be primarily on the airlines. "Earlier, they would go for full tank here and fly off to other destinations. That might come down beacuse of the hike in VAT." However, the exact impact even on traffic will be known only in March when the figures are compiled, he added.

The hike in ATF has been effected under section 79 (1) of the Andhra Pradesh Value Added Tax Act 2005, by amending schedule-VI of the Act as per an order issued by the principal secretary.

Source: ET
Centre wants petroleum and alcohol included in GST

Centre wants petroleum and alcohol included in GST

9:54 PM Add Comment
The Centre on Monday indicated that it wants the inclusion of petroleum products and alcohol in the proposed goods and services tax regime (GST). The states have however expressed concerns over its implementation.

The centre also wants to include purchase tax, electricity duty and other local taxes in the GST regime and has set up a target turnover of Rs 10 lakh.

The decision paper was released by the Empowered Committee (EC) of state finance ministers on GST and the centre responded by saying that it wants uniform rates of taxes both at centre and the state levels.

The department of revenue also indicated that two different rates of GTS would causer problems in its implementation. The centre has agreed to continue the exemption on 99 items that were exempt from paying VAT.

The EC recommended multiple rates for taxing goods which is similar to the currently implemented VAT and uniform threshold of Rs 10 lakh for goods and services at the state level.

The differences between the states and the centre could further delay the implementation of the GTS. It has already been decided to post pone the implementation from the earlier decided date of April 1, 2010.

The finance ministry also prefers 'appropriate binding mechanism to harmonise the various important aspects of the GST like rate structure, taxation base, exemption between Centre and States.'

The centre is aiming to curb the state's tendency to change taxes subjectively while the states want to protect their 'fiscal autonomy' and want to have the ability to change tax rates.

Source - TopNews