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Monday, 04 December, 2017, 16 : 00 PM [IST]

Jet fuel may come under GST soon

According to a report in the Financial Chronicle, Aviation turbine fuel or ATF and natural gas are likely to be among the first set of petro products to be included in the Goods and Services Tax (GST) ahead of an earlier agreed schedule. Sources said the ministry of petroleum and natural gas has already put a request for their inclusion in the indirect tax system and the finance ministry is studying whether the proposal could be placed before the GST Council at an early date. 

The next meeting of GST Council is slated in January. As part of its efforts to build consensus with states on GST launch, the Centre had earlier decided to exclude five petroleum products — crude oil, petrol, diesel, ATF and natural gas — from the list of items placed under GST. A member of the council had earlier told that though petroleum products were not kept out of GST, its inclusion in the regular tax system may have to wait at least for a year by when the revenue impact of GST would be better known. “ATF would be the first among petro products still outside GST (to come under the indirect tax regime). Inclusion of natural gas could be next or may be done simultaneously with ATF,” said a finance ministry official privy to the development. 

The inclusion of jet fuel would allow airlines to take input tax credit on the GST paid, thus bringing down the effective cost. Similarly, GST levy on natural gas would help staterun oil companies such as ONGC, IOC, BPCL and HPCL to save tax burden to the tune of INR 25,000 crore as they would get credit on taxes paid for inputs and services. Tax credits are not transferable between the two different taxation systems. 

Experts said that ATF price would come down if it is kept in the 18% GST bracket and no other surcharge is levied. Lower fuel cost would mean ticket prices going down for air travellers. It will benefit corporate travellers the most as they would be able to claim credit on GST paid besides their effective tax rate also coming down. As fuel accounts for nearly 30-40% of an airline’s operating cost, its addition into GST would bring significant gain for the sector. “Corporate travellers would be able to take credit of GST paid on air travel. For them, apart from lower ticket price, the effective GST rate would also come down. Overall, it would be beneficial both for airlines and air travellers,” said Anoop Kalavath, senior director at Deloitte India. He noted that the potential benefits are based on the assumption that ATF is placed under 18% tax bracket and no other surcharge is levied. Also, airlines are allowed to take input tax credit. 
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