Government may propose 'new formula' to bring Aviation Turbine Fuel under GST ambit

In what could be a win-win situation for the industry, central government and states, the GST Council is likely to deliberate on a formula to get ATF under the ambit of GST.

According to sources, "A likely proposal which can be put forward to the GST Council for their deliberation is to allow 18 percent GST plus VAT or Excise rate acceptable to states, as a proposed levy for Aviation Turbine Fuel (ATF)."

"VAT or excise rate can vary from state to state and the council can ensure that the cost of ATF doesn't really go up from the average existing cost," sources added.

The proposal is likely to be presented to states in the next GST Council meeting, which is believed to meet in March.

Sources say that "the government believes that the proposed formula will help protect states' revenues from ATF and also give the window for the aviation companies to claim input tax credit."

However, this is a thinking doing rounds at Central board of indirect taxes and customs (CBIC) and no final decision has been taken on the matter.

Also, as per the norms, any rate proposal is made to the council after GST Council nominated fitment committee assesses the proposal in totality and then makes its recommendations to the GST Council.

It is then upon the GST Council, where state Finance Ministers and Union Finance Minister deliberate on the proposal and take a decision whether to accept or reject the proposal, or to tweak the proposal and then accept it to be introduced.

A senior government official privy to the matter told CNBCTV18, "Globally in many countries such a formula of GST rate plus VAT or Excise has been used in the case of ATF. CBIC has evaluated this model and could be a possible solution to help all the three stakeholder -- industry, centre and states to accept it easily at the GST Council. Thus, GST Council will be appraised with this global best practice model and it is then for them to take a final call."

Currently, the Centre levies excise duty on ATF while state governments charge VAT.

Recently, at a post Budget discussion of Union Finance Minister Nirmala Sitharaman with Industry, aviation sector had requested to extend some urgent relief on high jet fuel prices.

At the post-budget interaction, on behalf of the civil aviation, travel, tourism and hospitality sectors as ASSOCHAM VP, SpiceJet CMD Ajay Singh, requested for Sitharaman's support for inclusion of aviation turbine fuel (ATF) under GST.

"Oil is at USD 90, the rupee is at 75 to a dollar and, therefore, the civil aviation sector has become chronically ill. Your kind support (in bringing ATF into GST) in this process will be extremely helpful," Singh said.

Post the request, at the same forum, Sitharaman replied that the government in the next meeting of the GST Council will place the issue of bringing ATF into the goods and services tax (GST) regime as the rising global fuel prices is a "concern".

"It is not with ... (the Centre) alone, it has got to go to the GST Council. The next time we meet in the Council, I will put it on the table for them to discuss it," Sitharaman clarified.