NEW DELHI: In a welcoming step for the aviation sector, the government has rolled back 11 per cent excise duty on aviation turbine fuel (ATF) used for international operations. The Finance Ministry has said ATF supplied as fuel to domestic carriers on international routes would continue to be exempted from basic excise duty from July 1.
The rollback comes after confusion arose regarding the excise duty on domestic airlines for their foreign flights after the government on July 1 slapped a `6 per litre special additional excise duty (SAED) or duty on the export of ATF or jet fuel. Oil companies were of the view that with the levy of export duty, domestic carriers would be liable to pay 11 per cent basic excise duty for the ATF they purchase for running overseas flights.
This issue was raised in a meeting chaired by India’s aviation minister Jyotiraditya Scindia on Tuesday as the levy would favour international carriers who are exempt from such duties as per the Chicago convention. Abhishek Jain, partner - indirect tax at KPMG India, says: “This alignment to the taxability as existent pre-imposition of excise duty on exports is a much welcome move for the airline industry, specifically in the backdrop of increasing ATF costs.”
The rollout also comes at a time when airlines’ operating cost has surged due to a record rise in ATF prices. ATF accounts for nearly 40 per cent of an airline’s operating expenses and this calendar year alone the fuel prices have gone up by a whopping 78 per cent . This has also made airfares at the movement much more expensive than in pre-covid times.
After a gap of nearly 2 years and 3 months, international flight movements from India have started witnessing some form of recovery and home-grown carriers are leaving no stones unturned to tap this market which, with the expectation of Air India, has been historically dominated by foreign airlines.