The Hindu Business Line : No exemption on aircraft lease tax from April 1

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New Delhi March 1 The Government has decided not to extend the exemption on withholding tax given to airlines for lease rental payments and aircraft engine leasing to the next fiscal.

The domestic aviation industry, however, is still hopeful that it would be able to convince the Finance Minister, Mr P. Chidambaram, on the need to continue with the exemption.

"The withholding tax exemption on payments made for leasing of aircraft and engines will cease from March 31 this year. There has been no demand from industry to extend it. Besides, we have already extended it three times," Mr Chidambaram told Business Line.

Arguing that the withdrawal of the exemption would lead to an increase in fleet acquisition cost of domestic airlines, Mr V. Thulasidas, President of the Federation of Indian Airlines, expressed the hope that the exemption would be included in the Finance Bill.

The industry is of the opinion that till a few years ago the exemption was only notional as growth was more or less stagnant, with the major players not leasing or acquiring aircraft aggressively.

"In the past 2-3 years, however, the industry has been on a high-growth trajectory and withdrawing the exemption now could impede this," said an airline official.

Globally, airlines find it economical to lease a major portion of their aircraft for 3-5 years, as this allows them to surrender or renew equipment if the market dynamics change.