Mumbai : Minister of state for civil aviation Jayant Sinha will meet chiefs of airlines on Thursday to discuss issues related to taxation in the sector, particularly goods and services tax (GST). A proposal to bring aviation turbine fuel (ATF) under the GST regime that will allow airlines to claim input tax credit from the government is among the issues likely to be discussed during the meeting, according to people aware of the matter.
An input tax credit is claimed when a company pays a combined tax on output (air tickets in airlines case), reducing the tax paid on input (jet fuel). Airlines currently pay central sales tax, value-added tax (VAT) and excise duty on ATF, and get credit only on VAT. Under GST, there will be a single tax on which airlines can claim credit.
All petroleum products are currently kept outside the ambit of GST. In the wake of constantly rising prices following the increase in global crude oil rates, petroleum minister Dharmendra Pradhan recently appealed to the GST Council, the nodal body for the tax, to bring petrol and diesel under the GST regime to ensure there is uniform taxation on it. But there has been no talk of bringing ATF under the tax. The Centre and states will both benefit if ATF, too, is brought under the GST regime.
No country which levies GST or its equivalent has kept petroleum products including GST outside its ambit, said a senior executive at a low-fare carrier, requesting not to be identified. European Union countries levy a single unified VAT while nations such as Australia, New Zealand, Canada and Singapore levy GST. Most countries levy VAT/GST on ATF.
Most of these countries allow credit of VAT/GST especially in cases of scheduled flights,Waman Parkhi, partner at KPMG, told media . Some countries even give exemption.
For non-scheduled flights like chartered flights, the regulations differ from country to country. Most of the countries apply zero rating for fuel supplied for international flights. ATF can be brought under GST with approval from GST Council, said Parkhi.Since these are mostly B2B (business-to-business) transactions between oil companies and airlines, providing credit also would be easy unlike in the case of petrol or diesel where the transaction could often be with the final consumer or B2C (business-to-consumer), he said.
Source : ET