Need to bring aviation turbine fuel under GST

The aviation industry in India has been growing exponentially for the past few years. With the increase in air travel, the demand for aviation turbine fuel (ATF) has also increased. However, the high taxes imposed on ATF by the state governments have resulted in an increase in the price of air travel, which has adversely impacted the growth of the aviation industry.

The Goods and Services Tax (GST) was introduced in India in 2017 to simplify the tax structure and reduce the tax burden on businesses. However, the aviation industry was excluded from the purview of GST, and ATF continues to be taxed at high rates by the state governments. This has resulted in a complex tax system and high prices of ATF, which in turn have made air travel expensive for consumers.

Why bring ATF under GST?

The inclusion of ATF under GST would provide a transparent and simplified tax structure for the aviation industry. Currently, the state governments levy taxes on ATF, which vary from state to state. This results in a complex tax structure, and airlines are unable to get input tax credit for the taxes paid on ATF. Moreover, the heavy taxes on ATF make air travel expensive for consumers, which adversely impacts the growth of the aviation industry.

If ATF is brought under GST, it would be taxed at a uniform rate across the country, which would bring transparency and simplify the tax structure for the aviation industry. Airlines would be able to get input tax credit for the taxes paid on ATF, which would help reduce the cost of air travel. Moreover, the inclusion of ATF under GST would provide a level playing field for all airlines and promote healthy competition in the aviation industry.

Benefits of bringing ATF under GST

The inclusion of ATF under GST would have several benefits for the aviation industry and the economy as a whole. Some of the key benefits are:

Uniform tax structure: The inclusion of ATF under GST would result in a uniform tax structure across the country. This would bring transparency and simplify the tax structure for the aviation industry.
Reduction in prices: The high taxes on ATF have resulted in high prices of air travel. If ATF is brought under GST, the tax burden on airlines would be reduced, which would result in a reduction in prices of air travel. This would make air travel more affordable for consumers and promote the growth of the aviation industry.
Promotion of healthy competition: The inclusion of ATF under GST would provide a level playing field for all airlines and promote healthy competition in the aviation industry. This would benefit consumers by providing them with more choices and better services.
Boost to the economy: The aviation industry is a major contributor to the Indian economy. The inclusion of ATF under GST would help promote the growth of the aviation industry, which would in turn benefit the economy by creating employment opportunities and generating revenue.

Challenges in bringing ATF under GST

The inclusion of ATF under GST is not without its challenges. Some of the key challenges are:

Loss of revenue for state governments: The state governments currently levy high taxes on ATF, which generates a significant amount of revenue for them. If ATF is brought under GST, the states would lose their power to levy taxes on ATF, which could result in a loss of revenue for them.‍
Complexity of the aviation industry: The aviation industry is a complex industry, and the inclusion of ATF under GST would require a thorough understanding of the industry and its tax structure. The government would need to work closely with the aviation industry to ensure a smooth transition to the new tax structure.‍
Resistance from state governments: The state governments have been resistant to the inclusion of ATF under GST, as it would result in a loss of revenue for them. The government would need to convince the state governments of the benefits of bringing ATF under GST and address their concerns.

Conclusion

The inclusion of ATF under GST is a crucial step towards simplifying the tax structure for the aviation industry and promoting its growth. The benefits of bringing ATF under GST are manifold, and it would provide a level playing field for all airlines and promote healthy competition in the industry. However, the government would need to work closely with the aviation industry and the state governments to address the challenges and ensure a smooth transition to the new tax structure.