ATF Likely to Be Included in GST Soon, Says Union Minister Hardeep Singh Puri
By: Admin Date: January 25, 2025 Category: GST Recent News Reading Time: 4 Min
Announcement on GST Inclusion
Union Minister of Petroleum and Natural Gas, Hardeep Singh Puri, announced that aviation turbine fuel (ATF) is likely to be brought under the Goods and Services Tax (GST) soon. During a press briefing at the curtain-raiser for India Energy Week 2025, Puri also revealed that natural gas is under consideration for GST inclusion.
“The GST Council is actively discussing the matter, and our sense from the last GST meeting was that ATF is likely to come under GST soon,” Puri said. He refrained from providing a specific timeline but mentioned it would happen “sooner rather than later.”
Current Tax Structure
ATF currently attracts the following taxes:
- Central Excise Duty: 11%, reduced to 2% for regional connectivity scheme (RCS) routes.
- State VAT: Varies significantly between states, ranging from 1% to 29%.
Major metro airports such as Kolkata, Chennai, Delhi, and Mumbai levy VAT at rates as high as 25% to 29%, increasing airlines’ operating costs. For RCS-UDAN scheme routes, state VAT is further reduced to 1-4%. International airlines are exempt from ATF taxes.
This complex and varied tax structure leads to a cascading effect of taxes and burdens the civil aviation industry significantly.
Benefits of GST Inclusion
Including ATF under GST could provide several benefits:
- Reduction in Cascading Taxes: Airlines can claim input tax credits, lowering their overall tax liability.
- Lower Operating Costs: Assuming an 18% GST rate, domestic airlines like IndiGo and SpiceJet could see a 7-9 percentage point reduction in fuel costs. This would marginally lower the cost per available seat kilometre (CASK).
- Win-Win Scenario: According to Puri, GST inclusion would benefit airlines, consumers, and governments.
However, the final impact depends on the GST rate and whether input tax credits are allowed. If a 28% GST rate is implemented without input tax credits, airlines may not experience significant benefits.
Natural Gas Under Consideration
In addition to ATF, the inclusion of natural gas under GST is being deliberated. States like Gujarat, Maharashtra, and Andhra Pradesh, which were previously hesitant, now recognize its potential advantages.
Impact on the Aviation Sector
Bringing ATF under GST could greatly improve airlines’ financial health, especially for those with significant domestic operations. However, the final GST rate and allowance of input tax credits remain crucial factors.
This move aligns with the government’s broader efforts to rationalize the tax structure and enhance the aviation sector’s competitiveness. While a definitive timeline has not been provided, stakeholders are optimistic that ATF inclusion in GST will happen “sooner rather than later.”
