The Centre on August 6 said the proposal to bring aviation turbine fuel (ATF) under the Goods and Services Tax (GST) regime was discussed at the 55th GST Council meeting in December 2024, but several states opposed the move, following which the existing tax structure was retained. 

Replying to a question in the Lok Sabha, Minister of State for Civil Aviation Murlidhar Mohol said the status quo on keeping ATF outside the GST regime continues after states expressed reservations over its inclusion.

ATF is among a handful of products that remain outside the GST framework. Crude oil, petrol, diesel, natural gas and ATF can be brought under GST only on the recommendation of the GST Council. Alcohol for human consumption and electricity also remain outside the GST regime.

Bringing ATF under GST has long been a key demand of airlines, which argue that a uniform tax structure would lower operating costs and improve efficiency by allowing input tax credit.

The Civil Aviation Ministry said airline operating costs are influenced by several factors, including international ATF prices, foreign exchange rates, excise duties, value-added tax (VAT), lease rentals and other operational expenses.

It added that while fuel accounts for a significant share of airline costs, airfares are determined by multiple factors, including real-time demand, competition, seasonality and operational considerations.

The government said it has taken several steps to support the aviation sector and keep air travel affordable.

These include a one-time budgetary support of up to Rs 10,000 crore for oil marketing companies (OMCs) to provide ATF price stabilisation support to scheduled Indian airlines during exceptional fuel price volatility arising from the West Asia crisis.

For domestic operations, ATF prices were capped at a maximum increase of 25 percent over the March 1, 2026 base price for April and May 2026.

The ministry also said it has consistently taken up the issue of high VAT on ATF with states and Union Territories. As a result, 23 states and UTs have reduced VAT on ATF since September 2021.

More recently, Maharashtra and Delhi cut VAT on ATF to 7 percent from 18 percent and 25 percent, respectively, for a period of six months.

Source: MoneyControl