States have rejected a proposal to include Aviation Turbine Fuel (ATF) in the ambit of the Goods and Services Tax (GST) regime, Finance Minister Nirmala Sitharaman said on December 21 during a briefing after the GST Council meeting.
Periodically, there have been requests from the Civil Aviation Ministry as well as the industry to include ATF in GST, however, while the Council deliberated on this issue, it was not agreed to.
"States did not feel comfortable, they saw ATF as part of the crude, petroleum, diesel basket, and therefore they said that alone can't be taken out, so it continues to remain where it is today," Sitharaman said.
Currently, ATF is outside the ambit of GST and attracts two tax rates -- an excise duty, which is levied by the central government and a Value Added Tax (VAT) that varies from state to state.
Jet fuel presently attracts a central excise duty of 11 percent, while a lower rate of 2 percent is offered under the Regional Connectivity Scheme (RCS).
When it comes to states, taxes on ATF can go up to as much as 30 percent in certain states.
"States want ATF to be outside GST just like petroleum and diesel. They are very clear about this," Sitharaman added.
Currently, five petroleum products - petrol, diesel, crude oil, natural gas and ATF - are excluded from GST. These five items continues to be taxed in accordance with the pre-GST tax regime, till the highest decision making panel in the new taxation system, the GST Council, chooses to include it.
Industry has time and again said that the exclusion of ATF and natural gas from GST is increasing the cost of these products as the tax on the inputs is not being credited against sale of these products, which ultimately, adds to the cost of production.
The aviation ministry too has in the past requested to include ATF under the GST umbrella as prices of jet fuel dominate costs for an airline.
Higher jet fuel cost makes air tickets more expensive, ultimately affecting customers.
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