Put ATF Under GST: Aviation Ministry Asks MoF
The Civil Aviation Ministry has formally asked the Finance Ministry to bring aviation turbine fuel (ATF) under the ambit of GST at an applicable rate not higher than 12% with a full input tax credit, as per a submission made by the Civil Aviation Ministry before a parliamentary standing committee.
“The issue of inclusion of ATF under GST has been a long-standing issue and requires final resolution by the GST Council,” the committee has noted in its report which was tabled in Parliament on Friday.
The Civil Aviation Ministry in its written note to the committee said the proposal is that applicable GST rate on ATF may be no higher than 12% with a full input tax credit. “Output tax on the sale of tickets both on business and economy air passenger transport services may be levied at a uniform rate of 12%. Output tax on air cargo transport and ancillary services such as Catering, Premium Services and Services on Add-ons may be levied at 12%. Airlines may be allowed full input tax credit for GST paid on all goods and services,” the note said on the proposals.
“The Committee is constrained to note that ATF prices in the country are distorted because it is subjected to multiple taxes by different entities. The airline industry is capital-intensive and works on very thin profit margins. This is why most Indian carriers are reeling under losses despite tremendous growth in air traffic. Therefore, relief on ATF is crucial for the viability of the airline industry and would be a major incentive for airlines to augment their operations,” the report says.
The report says that the Committee is concerned to note that the State Governments have shown reluctance to reduce the VAT on ATF for flights other than those operated under UDAN scheme.
“The Committee is of the view that reduction in VAT on ATF would be a notional revenue loss for the States, which can be offset by enhanced economic activities, which would be the result of increased air connectivity to the region. The Committee desires that the Ministry may pursue this issue with the States, in order to rationalize and minimize the State level taxes/surcharges on ATF and bring much needed relief and help, to the airline sector,” the report says.
