In a major relief to airline companies, the government on Wednesday announced excise duty cut on Aviation Turbine Fuel (ATF) from present 14% to 11% as the aviation industry has been hit hard by higher fuel prices. The new tax rate will be applicble from Thursday.
However, the government has raised customs duty from 0 to 5% — the net effect of which is likely to favor domestic oil companies. Recently, the government raised customs duty on jet fuel as part of its import curb to rein in pressure on the current account deficit (CAD).
The shares of major aviation stocks surged by nearly 14 per cent on Wednesday. Jet Airways shares rose by 13.8%, while SpiceJet shares rose by 8%. InterGlobe Aviation, which runs low-cost airline IndiGo surged about 6%. Aviation companies have also been hit by the double whammy of rising crude oil prices and the falling rupee.
This is the second oil related excise duty cut announced by the government this month. To provide relief to petrol and diesel consumers, the government announced an excise duty cut of Rs 1.5 a litre on both, while asking oil marketing companies to absorb a loss of Re 1 per litre. Following the decision, several states also announced VAT cut on fuel.
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