GST Council May Discuss Inclusion of ATF in GST Regime
Date: December 20, 2024
Category: GST Recent News
Read Time: 4 Minutes
The 55th GST Council meeting, scheduled for Saturday, may deliberate on a key proposal to bring Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) regime, sources revealed. This potential shift could be a game-changer for the aviation sector, currently burdened by a dual tax structure.
Current Taxation on ATF
Tax Structure:
At present, ATF is taxed through a combination of Value-Added Tax (VAT) levied by states and central excise duty by the central government.
Impact:
This dual taxation system causes a cascading effect, significantly inflating ATF costs for the aviation industry.
Challenges in the Current System
- No Input Tax Credit (ITC):
Although most inputs used in ATF production fall under GST, ATF itself is excluded from the tax regime. This exclusion prevents manufacturers from claiming ITC on GST paid for production inputs. - Escalating Operational Costs:
Due to the lack of ITC, the embedded input costs make ATF more expensive for refineries. Consequently, airlines and passengers face higher costs. - High Tax Burden:
The cascading taxes further increase operational expenses for airlines, which are already financially strained.
Potential Benefits of Bringing ATF Under GST
- Elimination of Cascading Taxes:
Inclusion under GST would ensure seamless ITC claims, thus reducing operational costs for refineries and airlines. - Cost Relief for Airlines:
Lower ATF costs could lead to reduced ticket prices, benefiting both airlines and passengers. - Improved Competitiveness:
The aviation sector could become more competitive on a global scale due to streamlined tax structures.
Industry Outlook
Industry stakeholders have long advocated for the inclusion of ATF under GST. Many in the aviation sector view this move as crucial for fostering growth, especially in light of rising fuel costs.
Conclusion
The inclusion of ATF in the GST regime could bring significant reform by addressing the cascading tax issue and providing relief to the aviation sector. However, a final decision will depend on consensus within the GST Council, as states currently earn substantial revenue from VAT on ATF.
