The GST Council is deliberating on the issue of including Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST), Business Today TV has learned from sources.

Under the current tax structure, ATF is currently subject to a central excise duty of 11 percent. The Regional Connectivity Scheme (RCS) offers a reduced rate of 2%.

In addition to excise duty, VAT is levied on ATF at different rates depending on the state, adding complexity and inconsistency to taxation.

ATF is considered a variant of kerosene oil. Although most of the inputs required for the production of ATF are covered under the GST regime, the ATF itself is excluded, leading to inefficiency in the tax structure.

ATF and natural gas are currently outside the GST regime and are subject to state-level taxes, including excise duty and value added tax (VAT). These taxes vary from state to state, significantly increasing operating costs for industries like airlines, which have long sought tax uniformity. For example, ATF can attract VAT rates of up to 30 percent in some states.

Impact on the aeronautical industry

ATF VAT is applied on the full value, including excise duty, resulting in a tax cascade (tax on tax). This increases the effective cost of ATF.

ATF manufacturers cannot claim input tax credit (ITC) on GST paid on their inputs, which adds to the overall cost of production and increases prices for the aviation sector.

Benefits of inclusion in GST

If the ATF is brought under the GST regime, it would help eliminate cascading taxes by allowing manufacturers to avail input tax credit.

This could significantly reduce the overall cost of ATF at the refinery level, potentially reducing costs for the aviation industry and encouraging better price predictability and stability.

Tarun Kapoor, advisor to the Prime Minister’s Office (PMO), has said that the government is working to bring aviation turbine fuel (ATF) and natural gas under the GST regime ( GST) during this financial year. Kapoor confirmed that discussions are underway to implement this change, which has been a long-standing demand from various sectors, especially aviation and energy.

The ongoing discussions around this issue are aimed at streamlining the tax structure of the ATF, making it more efficient and less burdensome for the aviation sector, which already faces several cost challenges .