Leasing aircraft in India has become much more expensive after the government withdrew a long-standing tax exemption on lease payments at the end of last month.
Estimates on how much this will increase aircraft and engine lease costs have ranged from 20% to well over 40%, as the exact amount will vary based on a number of factors.
Airlines are lobbying the government to drop the tax. The new tax regime does not apply to deals approved before the end of last month.
Last year finance minister P Chidambaram announced in his 2004-5 budget speech that airlines, which had long been exempt from paying hefty withholding taxes on leases of aircraft and engines, would be forced to pay them from 1 September 2004.
Airlines were outraged and as a result of opposition, which also came from some of his government colleagues, Chidambaram extended the exemption until 31 March 2005. In presenting his 2005-6 budget earlier this year he extended it for another six months, but insisted it would be the final extension.
State-owned Air India and Indian Airlines have been lobbying hard for the tax to be removed as they have traditionally relied heavily on leasing to expand their fleets.
Source: Flight International
