InvestorQ : Is ATF likely to be included in the GST list and if so when?
Lavanya Subramanian made post

Is ATF likely to be included in the GST list and if so when?

Anamika Sodhani answered.
1 year ago

Finance Minister, Nirmala Sitharaman, has confirmed that amidst repeated requests from the Civil Aviation Ministry, GST Council may debate the ATF inclusion issue. This is likely to be taken up for debate in the forthcoming GST Council meeting. This was necessitated after the recent spike in Brent Crude prices to $93/bbl which raised the spectre of another round of hikes in Aviation Turbine Fuels or ATF, which powers the airline industry.

It may be recollected that when GST was first introduced in India in July 2017, some products that were kept out of being subsumed into GST included crude oil, natural gas, petrol, diesel, and ATF. The idea was that both the center and the states depended on this source hugely for revenues and could not afford any formula change. That has ended up creating a dual level of taxation of central excise and state-level VAT on oil products.

Apart from CEOs of airline companies in India, even the Ministry of Civil Aviation has been demanding that the ATF be brought under the ambit of GST. This is to provide relief to airlines. Fuel costs are the single biggest operating cost item for an airline and aviation companies are struggling on account of crude at above $93/bbl. It is expected that a more rational GST regime would help solve this problem partially.

Currently, the ATF is subject to taxes at multiple levels. For instance, the central government levies excise duty on ATF while state governments impose VAT or value-added tax. Overall, the share of taxes on oil is nearly 65% today. Since 2014, the government took away most of the benefits of lower crude prices via higher duties. Now that the oil prices are elevated for a prolonged period, airlines are in for a double whammy. Hopefully, GST can help.

One thing that emerges from this debate is that the FM has personally acknowledged that airlines need a helping hand. In addition, FM is also willing to talk to banks to enable credit lines to airlines. The government may take a decision to include ATF under GST as an experimental case study to evaluate the overall impact on government revenues. If the template works, it can be extended gradually to other oil products too.