High prices reignite demand for aviation turbine fuel under GST

With the rising price of aviation turbine fuel (ATF), airlines are asking that it be put under the goods and services tax (GST).

In a presentation to aviation ministry officials, which included the minister of state Jayant Sinha, they argued that doing so would actually mean more revenue for the government.

The broad contention is if jet fuel comes under the GST and the rate of taxation on passenger tickets is raised to 12 per cent, the government’s annual revenue will be Rs 103.53 billion, around 7 per cent higher than the latest figure of Rs 97.13 billion. The current GST on an economy class ticket is 5 per cent.

States’ fear of revenue loss ensured petroleum did not come under the GST. In 2016-17, states got about 60 per cent of the money generated from tax on fuel, shows the official figure on state finances for 2016-17.

“The government seems to be listening. They have taken down our explanations, which will be forwarded to the finance ministry,” said an airline official who attended the meeting. Aviation Secretary Rajiv Nayan Choubey had said he would meet Revenue Secretary Hasmukh Adhia on the matter. 

“If ATF is brought under the GST regime, we can get input tax credit. The aviation ministry will cite the example of bunker oil, which was carved out of the oil basket to be put in the GST,” said the airline official.

Arilines’ margins have been squeezed by the surge in crude oil prices. A week earlier, Brent crude touched $80 a barrel, for the first occasion since November 2014. With excise tax, ATF in India is one of the costliest in the world.

After dismantling of the administered price mechanism from April 2001, the price of ATF in India is based on international import parity prices. It is directly linked to the benchmark of energy watchdog Platt’s publication of FOB Arabian Gulf ATF prices, not the actual cost of producing it in India. ATF prices for domestic operations include freight charges from the Gulf to India, domestic transportation and other charges, in addition to the margins for oil companies.