D.O. No.

AV-29011/75/2020-ER Date:

Dear

I am enclosing herewith suggestions of various civil aviation stakeholders which are

felt to merit favourable consideration for Union Budget 2020-21 in respect of direct taxes.
These are enclosed in the Annex herewith spelling out the rationale also.

2. The global economic downturn caused by COVID-19 pandemic has had far-reaching
consequences on the Indian aviation sector which was already reeling under losses or low
profits arising out of low revenue and higher input costs. The passengers carried by domestic
airlines during Jan-Oct 2020 were 493.31 lakhs as against 1182.06 lakhs during the
corresponding period of previous year thereby registering a decline in growth of 58.27%.
Similarly, from Jan-Oct 2020 the total freight (domestic and international) witnessed a
decline of 32% as compared to the same period in 2019.

3. Coronavirus outbreak has been highly disruptive for aviation sector, threatening the
survival and sustainability of airlines. Besides the sluggish economy, airlines have been
burdened by rising costs of maintenance, high fuel prices, and mounting debt, among other
things. Airlines had to completely stop operations due to the strict measures taken for
checking the spread of the virus. This resulted in almost complete loss of revenue even
though fixed costs remained high as before. To reduce losses, airlines have taken measures to
reduce fixed costs, but these measures are insufficient to keep them afloat for long. Even
though airlines have re-started operations after easing of restrictions, the number of flights
operated is a small percentage of pre-COVID levels. The load factors are also low and hence
it requires early intervention and effective measures by Government of India to prevent
airlines in India to go out of business.

4. The civil aviation sector stakeholders were consulted in the matter of formulation of
indirect and direct tax policy, and their proposals have been examined in this Ministry. It has
been strongly felt that civil aviation sector provides vital domestic and international
passenger and logistics service for high-value industrial goods and therefore deserves a
nondiscriminatory treatment and on par with that accorded to other big infrastructure, in
particular, road, rail, sea and inland waterways-based transportation. Therefore, there is an
urgent need to favourably consider Aviation sector budget proposals for refueling the growth
and development of the Indian Aviation Sector.

5. With respect to specific proposals, in so far as direct taxes are concerned, the
proposals are attached at Annex herein. Notably, I would like to draw your specific attention
to the following among them:
(i) Deduction under Section 80‐IA of the Act to major expansions creating new
undertaking or facilities like new Runway or Terminal
 (ii) Exemption from withholding tax on payment of interest on overseas bonds having
maturity period more than 5 years
(iii) Reduction of Minimum Alternate Tax (MAT) Rate from 17.47% to 5% for
infrastructure companies
(iv) Introducing Group Taxation concept under income Tax Act
(v) Deduction u/s 80G to be allowed towards Swachh Bharat Abhiyan and Clean
Ganga Mission as part of CSR initiatives
(vi) Exemption to airlines from provisions of section 194O for positive impact on their
cash flow
(vii) Reinstatement of exemption for lease rentals for leased aircraft

6. I look forward to our further engagements on the above-mentioned matters.

Warm regards,

Yours sincerely,

(Pradeep Singh Kharola)

Encl (s): As above

Shri Ajay Bhushan Pandey, IAS

Finance Secretary
Ministry of Finance
Government of India
North Block, New Delhi – 110 001
D.O. No. AV-29011/75/2020-ER Date:

Dear

I am enclosing herewith suggestions of various civil aviation stakeholders which are

felt to merit favourable consideration for Union Budget 2020-21 in respect of indirect taxes
(excluding GST-related suggestions). These are enclosed in the Annex herewith spelling out
the rationale also.

2. The global economic downturn caused by COVID-19 pandemic has had far-reaching
consequences on the Indian aviation sector which was already reeling under losses or low
profits arising out of low revenue and higher input costs. The passengers carried by domestic
airlines during Jan-Oct 2020 were 493.31 lakhs as against 1182.06 lakhs during the
corresponding period of previous year thereby registering a decline in growth of 58.27%.
Similarly, from Jan-Oct 2020 the total freight (domestic and international) witnessed a
decline of 32% as compared to the same period in 2019.

3. Coronavirus outbreak has been highly disruptive for aviation sector, threatening the
survival and sustainability of airlines. Besides the sluggish economy, airlines have been
burdened by rising costs of maintenance, high fuel prices, and mounting debt, among other
things. Airlines had to completely stop operations due to the strict measures taken for
checking the spread of the virus. This resulted in almost complete loss of revenue even
though fixed costs remained high as before. To reduce losses, airlines have taken measures to
reduce fixed costs, but these measures are insufficient to keep them afloat for long. Even
though airlines have re-started operations after easing of restrictions, the number of flights
operated is a small percentage of pre-COVID levels. The load factors are also low and hence
it requires early intervention and effective measures by Government of India to prevent
airlines in India to go out of business.

4. The civil aviation sector stakeholders were consulted in the matter of formulation of
indirect and direct tax policy, and their proposals have been examined in this Ministry. It has
been strongly felt that civil aviation sector provides vital domestic and international
passenger and logistics service for high-value industrial goods and therefore deserves a
nondiscriminatory treatment and on par with that accorded to other big infrastructure, in
particular, road, rail, sea and inland waterways-based transportation. Therefore, there is an
urgent need to favourably consider Aviation sector budget proposals for refueling the growth
and development of the Indian Aviation Sector.

5. With respect to specific proposals, in so far as indirect taxes are concerned (excluding
GST-related ones), the proposals are attached at Annex herein. Notably, I would like to draw
your specific attention to the following among them:
 (i) Input Credits with respect to events organized on specific occasions as mandated
by Government
(ii) Dispensation of digital signature on invoices
(iii) Increase in baggage allowance under Baggage Rules 2016
(iv) Foreign Trade Policy 2015-20, Amendments to Appendix 3E to include the Airport
Services retrospectively
(v) Passenger transportation services and MRO services to be covered in eligible
services for claiming the benefit of SEIS scheme

6. I look forward to our further engagements on the above-mentioned matters.

Warm regards,

Yours sincerely,

(Pradeep Singh Kharola)

Encl (s): As above

Shri Ajay Bhushan Pandey, IAS

Finance Secretary
Ministry of Finance
Government of India
North Block, New Delhi – 110 001
D.O. No. AV-29011/75/2020-ER

Date:

Dear

I am enclosing herewith suggestions of various civil aviation stakeholders which are

felt to merit favourable consideration for Union Budget 2020-21 in respect of the indirect tax
proposals raised by the stakeholders related to GST. These are enclosed in the Annex
herewith spelling out the rationale also.

2. The global economic downturn caused by COVID-19 pandemic has had far-reaching
consequences on the Indian aviation sector which was already reeling under losses or low
profits arising out of low revenue and higher input costs. The passengers carried by domestic
airlines during Jan-Oct 2020 were 493.31 lakhs as against 1182.06 lakhs during the
corresponding period of previous year thereby registering a decline in growth of 58.27%.
Similarly, from Jan-Oct 2020 the total freight (domestic and international) witnessed a
decline of 32% as compared to the same period in 2019.

3. Coronavirus outbreak has been highly disruptive for aviation sector, threatening the
survival and sustainability of airlines. Besides the sluggish economy, airlines have been
burdened by rising costs of maintenance, high fuel prices, and mounting debt, among other
things. Airlines had to completely stop operations due to the strict measures taken for
checking the spread of the virus. This resulted in almost complete loss of revenue even
though fixed costs remained high as before. To reduce losses, airlines have taken measures to
reduce fixed costs, but these measures are insufficient to keep them afloat for long. Even
though airlines have re-started operations after easing of restrictions, the number of flights
operated is a small percentage of pre-COVID levels. The load factors are also low and hence
it requires early intervention and effective measures by Government of India to prevent
airlines in India to go out of business.

4. The civil aviation sector stakeholders were consulted in the matter of formulation of
indirect and direct tax policy, and their proposals have been examined in this Ministry. It has
been strongly felt that civil aviation sector provides vital domestic and international
passenger and logistics service for high-value industrial goods and therefore deserves a
nondiscriminatory treatment and on par with that accorded to other big infrastructure, in
particular, road, rail, sea and inland waterways-based transportation. Therefore, there is an
urgent need to favourably consider Aviation sector budget proposals for refueling the growth
and development of the Indian Aviation Sector.

5. The majority of the indirect tax proposals raised by the stakeholders relate to GST.
While appreciating that these would need to be placed before the GST Council, I am taking
the liberty of attaching them herein at Annex for suitable resolution in advance. Some major
notable issues are:

(i) ATF should be subjected to GST and GST paid on such ATF should be available
as ITC to airline industry
(ii) IGST should be exempt on reimport of repaired aircraft / aircraft parts including
engines under Customs
(iii) A uniform rate of 5% should be applied on all parts of aircraft heading 8802
imported under any chapter
(iv) Grant of ITC on Original Works for construction & development of Airports under
Infrastructure Development Projects & Regional Connectivity Scheme (RCS).
(v) Section 9(1) of CGST Act & Section 5(1) of IGST Act to include User
Development Fee (UDF), Airport Development Fee (ADF), Airport Security Fees
(ASF) under Exemption List
(vi) Waiver of GST applicable at 18% for all commodities including Perishable/
Agricultural products on the Air Cargo handling / TSP charges at Airports (Both
for Export, Import, Domestic outbound & Domestic Inbound) for at least 02 (two)
financial years.

6. I look forward to our further engagements on the above-mentioned matters.

Warm regards,

Yours sincerely,

(Pradeep Singh Kharola)

Encl (s): As above

Shri Ajay Bhushan Pandey, IAS

Finance Secretary
Ministry of Finance
Government of India
North Block, New Delhi – 110 001