The civil aviation industry anticipates legislative changes targeted at easing business operations and lowering the industry’s tax burden as Finance Minister Nirmala Sitharaman gets ready to present the Union Budget 2024–25 later this month. Private airport operators have issued the government a memorandum with various suggestions for streamlining the direct and indirect tax structures.
It is estimated that the drone industry will reach Rs 15,000 crore turnover by the year 2026. Today, there are 270 drones startups in India: Union Civil Aviation minister Jyotiraditya M. Scindia during the two-day Bharat Drone Mahotsav 2022 in Delhi pic.twitter.com/qptux6s5on
— ANI (@ANI) May 27, 2022
Duty-Free and Tax Reforms
The Association of Private Airport Operators has asked the finance ministry to provide specific clarifications regarding the tax that airlines charge on user development fees that passengers pay. Members of the association include GMR-run Delhi International Airport Ltd and Adani-operated Mumbai International Airport Ltd.
“Airlines shouldn’t deduct tax at source on such an amount when paying the airport operator because they are merely serving as a collection agency. According to the private airport body, it causes the airport operator’s working funds to be blocked.
Additionally, the organization has asked the government to raise the duty-free amount from the existing ₹50,000, a cap set in April 2016, to ₹100,000 for purchases made from an Indian duty-free shop. The group has also asked the government to permit duty-free shop operators to sell domestic Indian liquor at departures tax-free and to be regarded as exports to keep up with inflation and boost foreign earnings.
The expense burden associated with the pricing of aviation turbine fuel (ATF) continues to be a significant obstacle for airlines. Indian airlines have long urged that the government incorporate ATF into the goods and services tax regime and further rationalize the duty structure for the airline.
Jet fuel, or ATF, accounts for around 40% of an airline’s overall costs, while the global average is between 20% and 25%. Jet fuel prices in New Delhi saw a sequential decrease of 6.5% in June to ₹94,969.01 per kilolitre, although they are still significantly higher than pre-pandemic levels, which were approximately ₹64,000 per kg in 2019–20.
Aircraft Import Tariff and Domestic Production Incentives
The operators of private aircraft are eager to know more about the 2.5% import tariff that applies to aircraft imported for use in non-scheduled operations. The sector hopes that this tax, which was put in place some 15 years ago, would be eliminated by the government.
Given that Indian airlines, such as Air India, IndiGo, and Akasa, now have an orderbook with a cumulative total of more than 1,600 planes, companies that manufacture aircraft and engine components are enthusiastic about incentives to strengthen the domestic supply chain.
“We would welcome a production-linked incentive program focused on strong in-country value addition for the production of airplane components and subassemblies. Policies like tax reductions for systems development and aerospace R&D will also be beneficial. Aravind Melligeri, chairman and CEO of the company that manufactures aviation components in Karnataka. To make India a drone hub by 2030, the burgeoning drone sector is also looking for further legislative and financial initiatives.
Drone Industry’s Legislative and Financial Needs
“Deep support for the drone ecosystem, such as expanding the PLI scheme, allocating a specific fund for research and development, establishing shared testing facilities for larger systems, establishing a certification program for drones operating beyond visual line of sight, and increasing government-led market opportunities, is essential for the development of this emerging sector in the nation,” stated ideaForge CEO Ankit Mehta. The company Drone Destination, which trains drone pilots, anticipates a significant rise in the use of drones in mining, insurance, asset and infrastructure inspection, and monitoring.
Drones, their parts, and their parts should all be subject to a standard 5% GST rate. Drone service providers should be eligible for federal and state subsidies, especially for drone applications related to agriculture like drone spraying. Chirag Sharma, CEO of Drone Destination, said, “This will support the push for Kisan drone adoption and increase the use of drones in agriculture.” Currently, the GST rate on all drones is 18%, except agricultural survey drones, which are subject to a 5% tax.
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