GST Council may discuss inclusion of ATF under GST: Sources

The GST Council is discussing the issue of including Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST), Business Today TV has learned from sources.

According to the current tax situation, ATF currently has an 11 percent central tax rate. A lower rate of 2 percent is available under the Regional Connectivity Scheme (RCS).

In addition to excise duty, VAT is levied on ATF at different rates depending on the state, adding complexity and inconsistency to taxation.

ATF is considered a kerosene oil. While most of the inputs required for the production of ATF are brought under the GST regime, the ATF itself is exempted, resulting in ineffective taxation.

Currently, ATF and natural gas fall outside the GST regime and are subject to government taxes, including value added tax and value added tax (VAT). These taxes differ across countries, greatly increasing the operating costs of industries such as airlines, which have long required uniform taxes. For example, ATF can attract VAT rates of up to 30 percent in some countries.

Impact on the airline industry

VAT on ATF is applied to the total price, including the foreign tax, which leads to a lower tax rate (tax on tax). This increases the effective cost of ATF.

ATF manufacturers are unable to claim Input Tax Credit (ITC) on the GST paid on their inputs, which increases the overall cost of production and raises prices for the aviation industry.

Benefits included under GST

If the ATF is brought under the GST regime, it would help eliminate low tax rates by allowing manufacturers to get tax credit.

This would reduce the overall cost of ATF refining, lower costs for the airline industry and promote price reliability and stability.

Tarun Kapoor, Advisor to the Prime Minister’s Office (PMO), said that the government is working to bring aviation fuel (ATF) and natural gas under the purview of Goods and Services Tax (GST) within this financial year. Kapoor confirmed that negotiations are underway to implement this change, which has been a long-standing demand from various sectors, especially aviation and energy.

The ongoing discussions on this topic aim to improve the tax system of the ATF, to make it more efficient and less burdensome for the aviation sector, which is already struggling with various price challenges.