Slashing of VAT :
In order to encourage better connectivity with more flights, Govt of Madhya Pradesh slashed the VAT on ATF . The Govt of Madhya Pradesh was expecting more flights , however that didn’t happen and Jet Airways discontinued flights.
The VAT on ATF was 23% in Madhya Pradesh uptil March, than State Govt slashed the VAT to 4%. Air ticket prices were also expected to come down after reduction on VAT on ATF, however that also have been increasing only.
Jet Airways, was one of the two airlines that operate from Bhopal, has discontinued the flight which connected Bhopal to Raipur and Ahmedabad in the period after the reduction was announced. A flight to Hyderabad has also been discontinued. Jet Airways has also discontinued the Bhopal-Chennai and Bhopal-Kolkata flights that were being run by the airline prior to the reduction in VAT on ATF. SpiceJet also discontinued its Bhopal-Hyderabad services.
Before this most of the Airlies were had been making the demand for waiver on VAT on ATF for a long time. They were arguing that lower fuel prices would encourage airlines to refuel in MP putting the state on the map for airlines.
However, Chattisgarh , the neighbouring country was sighted as an example where the airline connectivity had almost increased to 100% in five months after it reduced VAT on ATF to 6% only.
So, We can say cheaper ATF will encourage the Airlines as it will ease their burden, but the primary requirement is passenger load. This should always be there in order for getting airlines to any destination.
Indore has about 15 flights per day. The number of flights has remained just constant . There is no impact of slashing of VAT on ATF in Indore.
Airlines of India expects more Slashing of VAT in other states across India. This is one of the best move in order to ease the burden of airlines.