The GST Council is currently deliberating the possibility of including Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) framework, according to sources familiar with the matter. If implemented, this move could significantly reduce tax cascading and lower aviation costs in India, offering a potential boost to the aviation sector.
At present, ATF is subject to an 11 percent central excise duty, which increases operational costs for airlines. Under the existing framework, airlines are unable to claim input tax credits for excise paid on ATF, resulting in higher overall costs, which are often passed on to passengers in the form of increased ticket prices. The inclusion of ATF under GST could provide relief by standardizing the tax treatment and eliminating the cascading effect of taxes, which would, in turn, reduce the cost of aviation operations.
Additionally, a reduced rate of 2 percent is available under the Regional Connectivity Scheme (RCS), which has provided some relief to airlines operating under this initiative. However, the broader inclusion of ATF under GST would ensure a more comprehensive and uniform approach to tax policy across the aviation sector, potentially leading to lower aviation costs on a national scale.
The GST Council’s discussions on the issue come at a time when the aviation industry is looking for ways to improve its financial sustainability, particularly in the wake of challenges posed by rising fuel prices and inflationary pressures. A move to include ATF under GST could help address some of these challenges by offering tax relief and improving the overall efficiency of the sector.
While the inclusion of ATF under GST is still under consideration, it is seen as a positive step toward streamlining the taxation structure and making air travel more affordable for consumers. If approved, this change could have far-reaching benefits for both airlines and passengers, contributing to the long-term growth and competitiveness of the Indian aviation industry.