Revealing the draft civil aviation policy, the government has proposed tax incentives for airlines, maintenance and repair works of aircraft, besides mooting 2 per cent levy on all air tickets to fund regional connectivity scheme. In a significant move, the civil aviation ministry has pitched for over 50 per cent foreign direct investment in domestic carriers, in case the open skies policy is implemented. Under the policy, overseas airlines can operate unlimited number of flights into and out of India.
Civil Aviation Secretary R N Choubey said the ministry has proposed 2 per cent levy on all domestic and international tickets for regional connectivity scheme, adding that “the government expects about £150 million annually from charging 2 per cent levy.” The draft of the civil aviation policy proposes a slew of tax incentives for airlines and maintenance works. The policy has mooted various measures to boost regional connectivity, including setting up of no-frills airport and providing viability gap funding for airlines.
Another proposal is to cap fare at Rs 2,500 for one-hour flight under regional connectivity scheme. To make MRO (maintenance repair, overhaul) cheaper, the government has proposed to exempt such activities from service tax net and not levy any VAT. However, the government has decided to seek more comments from stakeholders before taking a final call on 5/20 norms, whereby local airlines can fly overseas only when they have five years operational experience and at least a fleet of 20 aircraft.
