The prices of your routine domestic flight tickets is set to go up in the next days, and it's not just the approaching holiday season in December that's to blame. In order to meet its falling revenue target, the Arvind Kejriwal government may soon increase the value added tax (VAT) on the Aviation Turbine Fuel (ATF) from the current 20 per cent to 25 per cent.. As a result, all domestic aircrafts buying jet fuel from Delhi will have to pay five per cent extra VAT, which aviation experts believe is likely to percolate to the passengers through an increase in the ticket cost.

Government sources say the decision is likely to be implemented within the next 10 days. The increase in VAT is likely to fetch an additional monthly revenue of at least Rs6 to Rs7 crore to the Delhi government, with about 62,000 lakh kilo litres of jet fuel is consumed in Delhi every month for domestic flights. Sources informed that the decision was taken in the light of poor VAT revenues collected from ATF, which had gone down significantly since the beginning of this year because of a massive decline in global oil prices.

According to sources, being the capital, the domestic airport of Delhi serves as the origin as well as the transit point to hundreds of flights every day and many aircrafts refill their jet fuel from here. "The VAT was increased by only five percent to ensure that least impact on the aviation sector and the passengers," an official said. In the last budget session, the AAP government had introduced a VAT Amendment Bill that will allow the government to hike the tax on 11 goods by up to 30 per cent in future, taking into account the poor VAT collection in the previous few months. VAT accounts for a major source of revenue for the Delhi government.

Earlier, the cap on the VAT on 11 items under the fourth schedule was between 12.5 and 20 per cent. As per the bill, the government can increase VAT on petroleum and tobacco related products, such as naptha, spirit, gasoline, furnace oil, wax (except candle wax), any mixture and combination of above products, foreign liquor and Indian-made foreign liquor, country liquor, narcotics, molasses, rectified spirit, lottery tickets, brake fluid, tobacco gutkha, unprocessed tobacco, bidis and tobacco used in making bidis and hookah tobacco, aerated drinks and watches costing above Rs 5,000, without calling for a special assembly session. ATF was the first in the list.

The AAP government has set a target of Rs2,4000 crore for the current fiscal year of 2015-16, Rs5,500 crore more than the approximately Rs18,550 crore raised last year. The decision may not go well with the Centre, since in March this year, it had asked state governments to reduce VAT on jet fuel to provide relief to the cash-strapped aviation sector. The price of ATF sold in the country is already 50 to 60 per cent cent higher than countries like Singapore and Dubai, because of the additional state VAT or sales tax implemented on it.

Sudhakar Reddy of Air Passengers Association of India told dna that any state should not increase VAT further on jet fuel as that will affect the aviation sector adversely. According to him, the ATF accounts for up to 50 per cent of the operational cost of an airline as against 35 per cent globally. "So the flight tickets may go up to 2 per cent, which may not be very high. However, given the Centre's call states to slash VAT on jet fuel, it should not be increased any further," he said.

He, however, admitted that certain states implement much higher VAT on ATF, which if rationalised by states would bring down airline operational costs substantially. The domestic airlines spent an estimated amount of Rs27,000 crore on ATF in 2013-14.

Centre asks state govts to reduce VAT The AAP government has set a target of Rs2,4000 crore for the current fiscal year of 2015-16, Rs5,500 crore more than the approximately Rs18,550 crore raised last year. The decision may not go well with the Centre, since in March this year, it had asked state governments to reduce VAT on jet fuel to provide relief to the cash-strapped aviation sector.

The price of ATF sold in the country is already 50 to 60 per cent cent higher than countries like Singapore and Dubai, because of the additional state VAT or sales tax implemented on it.