After two years of the pandemic, India’s domestic air travel showed signs of recovery from November 2021. The recovery was soon cut short by the Omicron variant of the COVID-19 virus. Post pandemic, the government planned to reinstate regular international flight schedules from December, which was again postponed due to the rising COVID-19 cases. The number of domestic passengers reduced by 25% in the first week of January 2022. There are also issues of fuel price rise haunting the Indian aviation sector. The fuel cost account for nearly 45% of the cost of operations for airlines in India.
Indian aviation industry expects some major resolutions to appear in Union Budget 2022-23. One such recommendation is bringing fuel under GST, a decision which lies with the GST Council. The budget should also consider incentives in terms of tax breaks or get reductions in taxes for the aviation sector. The airline industry is taxed high at 21%, but it lacks provision for input tax credits, which is seen for other sectors.
Indian airline industry further expects to suspend Minimum Alternate Tax (MAT) for the aviation and airport sector for a minimum period of two years. The government may also consider reducing MAT from 18% to 5% for two years.
Another budget 2022 recommendation for airlines is GST for pending earthworks for airport construction. The recommendation is to extend a concessional rate of GST at 5% for earthworks, even for the works by the private sector.
Baggage allowance can be increased from the current Rs 50,000 to Rs 100,000 for purchase from the duty-free shop in India. Such an increased allowance will help Indian airports to improve their shopping revenues, and the benefits will also reflect in earnings from foreign exchanges, among others.
Provide reliefs to ailing airlines, industry experts say
Industry experts, as quoted by Economic Times, also support in providing relief to the ailing aviation sector. They suggest providing incentives for airlines in Budget 2022, perhaps in terms of tax waiver, at least for a certain period. Airports are the worst affected with zero revenues, but high fixed operational costs. Any relief provided in terms of airport construction and business operations would be beneficial to the airports. According to an industry expert, this can resolve cash flow issues to a great extent.