Indian Airlines Demand GST Reform For Jet Fuel To Cut Costs Whalesbook

Indian airlines are advocating for the inclusion of Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) framework, aiming to significantly lower their operational expenses. Currently, ATF is subject to varying state taxes, resulting in a cascading tax effect that inflates costs. The industry estimates that bringing ATF under GST could reduce fuel expenses by as much as 20%, enhancing the financial viability of airlines. This move is seen as critical for the aviation sector, which has been grappling with high operating costs and fluctuating fuel prices. The demand is centered around streamlining the tax structure and enabling airlines to claim Input Tax Credit (ITC) on ATF, which is not possible under the current system. If implemented, this reform could lead to more competitive airfares and increased air travel accessibility.

Section 9 of the CGST Act, 2017, empowers the government to levy GST on goods and services. Currently, ATF is outside the purview of GST, preventing airlines from availing ITC on it. Including ATF under GST would require a notification amending the list of exempted goods, potentially triggering a significant change in tax liability and compliance for the aviation sector.

From a tax perspective, the inclusion of ATF under GST would simplify tax compliance for airlines and reduce the complexities associated with state-level taxation. However, the GST Council needs to address concerns about potential revenue loss for states and ensure a balanced approach that benefits both the aviation industry and the government's fiscal interests. This reform could set a precedent for including other petroleum products under GST in the future.

Inclusion of ATF under GST would allow airlines to claim ITC, reducing their operational costs and potentially lowering airfares, benefiting both the industry and consumers.