Exclusive | GST Council likely to discuss bringing ATF under GST regime at 55th meeting, say sources

In a significant development for the aviation sector, the upcoming 55th GST Council meeting is likely to deliberate on the possibility of bringing aviation turbine fuel (ATF) under the ambit of the Goods and Services Tax (GST) regime, according to sources.

Sources familiar with the 55th GST Council agenda revealed that the proposal is to “take a view on whether to bring ATF under GST or whether to maintain the status quo.”

Currently, ATF attracts an 11% central excise duty, with a concessional rate of 2% applicable under the Regional Connectivity Scheme (RCS). In addition, ATF is subject to Value Added Tax (VAT) at varying rates across states, as each state imposes a different VAT rate.

According to Article 279A of the Constitution, which was introduced alongside the GST framework, the GST Council “shall recommend the date on which the goods and services tax be levied on petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel.”

It was also specified that until the Council deems it appropriate, these products will be zero-rated, allowing the Council to determine rates in the future.

Sources further disclosed that the agenda notes include detailed reasoning for and against the proposal to bring ATF under GST.

“The agenda says that since ATF is a variant of kerosene oil and most of the inputs for the production of ATF are within GST, ATF can be considered to be included under the GST regime with a dedicated entry and rate,” said sources aware of the agenda proposal.

They added, “The agenda note further states that VAT is applicable on the value of ATF, which includes the Central Excise duty paid on it. This, in turn, results in the cascading of taxes.”

Additionally, sources explained, “Industry and manufacturers of ATF currently are not able to avail input tax credit (ITC) on the inputs they pay for, which adds to the cost of ATF.”

“High costs of ATF make flying expensive. To reduce the cost of flying, the operating costs for the civil aviation industry, and air ticket prices, bringing ATF under GST would mitigate cascading taxes and potentially lower costs for refineries as well,” said sources familiar with the agenda.

The key question now is whether states will agree to move forward with discussions on this proposal. It also remains to be seen if states, many of which face revenue deficits, will be willing to forgo their share of revenues from ATF.

#CNBCTV18Exclusive | #GSTCouncil likely to discuss possibility of bringing #ATF under #GST regime.

GST Secretariat View: #VAT an ATF includes central excise duty, results in cascading of taxes, sources to @TimsyJaipuria pic.twitter.com/N5dbNIJ46s

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