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Airlines seek GST on ATF at 5% with full tax credit to help cut costs FIA urges Centre to scrap excise, State VAT on jet fuel, says move could help improve affordability India's leading domestic airlines have urged the Centre to bring Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) regime at a rate of 5 per cent with full Input Tax Credit (ITC), arguing that the move would significantly reduce operating costs, improve airline liquidity and make air travel more affordable. In a representation to the Ministry of Civil Aviation, reviewed by businessline, the Federation of Indian Airlines (FIA), which represents major scheduled carriers including IndiGo, Air India and SpiceJet, sought immediate government intervention to abolish Central Excise Duty and State Value Added Tax (VAT) on ATF and replace the existing tax structure with a uniform 5 per cent GST regime carrying full input tax credit benefits. According to the industry body, ATF currently remains outside the GST framework despite constitutional provisions enabling its inclusion, resulting in airlines bearing irrecoverable Central Excise Duty and State VAT that substantially inflate operating costs. The FIA stated that ATF accounts for nearly 40 per cent of airline operating expenditure, making it the single-largest cost component for carriers. Besides, the industry body argued that ATF presently attracts around 11 per cent Central Excise Duty along with State VAT ranging between 1 per cent and 29 per cent, neither of which is available as input tax credit to airlines. It added that the absence of a seamless credit chain also results in cascading taxes embedded in fuel prices. Furthermore, the FIA said India's taxation framework for ATF remains an outlier globally, noting that countries such as Germany, the United Kingdom, Australia and Canada levy VAT or GST on aviation fuel but allow full input tax credit, effectively eliminating the tax burden on commercial airlines. As per the representation, eliminating irrecoverable taxes on ATF could reduce delivered fuel costs by around 28 per cent, lowering overall airline operating costs by nearly 8-9 per cent. Additionally, the industry body argued that lower operating costs could eventually translate into reduced airfares, stimulating passenger demand in India's highly price-sensitive aviation market. The FIA stated that bringing ATF under GST would eliminate cascading taxation, ensure a uniform tax structure across States, improve airline liquidity, reduce working capital requirements and enhance the long-term financial sustainability of the aviation sector. It also said the move would promote fuel-efficient operations while supporting tourism, cargo, logistics and regional connectivity. Additionally, the industry body said that a higher GST rate such as 18 per cent could create an inverted duty structure requiring continuous government refunds, whereas a 5 per cent rate would align with the GST applicable on economy class air tickets and avoid structural tax distortions. www.thehindubusinessline.com, dt. 08-07-2026

Airlines seek GST on ATF at 5% with full tax credit to help cut costs

FIA urges Centre to scrap excise, State VAT on jet fuel, says move could help improve affordability

India's leading domestic airlines have urged the Centre to bring Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) regime at a rate of 5 per cent with full Input Tax Credit (ITC), arguing that the move would significantly reduce operating costs, improve airline liquidity and make air travel more affordable.

In a representation to the Ministry of Civil Aviation, reviewed by businessline, the Federation of Indian Airlines (FIA), which represents major scheduled carriers including IndiGo, Air India and SpiceJet, sought immediate government intervention to abolish Central Excise Duty and State Value Added Tax (VAT) on ATF and replace the existing tax structure with a uniform 5 per cent GST regime carrying full input tax credit benefits.

According to the industry body, ATF currently remains outside the GST framework despite constitutional provisions enabling its inclusion, resulting in airlines bearing irrecoverable Central Excise Duty and State VAT that substantially inflate operating costs.

The FIA stated that ATF accounts for nearly 40 per cent of airline operating expenditure, making it the single-largest cost component for carriers.

Besides, the industry body argued that ATF presently attracts around 11 per cent Central Excise Duty along with State VAT ranging between 1 per cent and 29 per cent, neither of which is available as input tax credit to airlines.

It added that the absence of a seamless credit chain also results in cascading taxes embedded in fuel prices.

Furthermore, the FIA said India's taxation framework for ATF remains an outlier globally, noting that countries such as Germany, the United Kingdom, Australia and Canada levy VAT or GST on aviation fuel but allow full input tax credit, effectively eliminating the tax burden on commercial airlines.

As per the representation, eliminating irrecoverable taxes on ATF could reduce delivered fuel costs by around 28 per cent, lowering overall airline operating costs by nearly 8-9 per cent.

Additionally, the industry body argued that lower operating costs could eventually translate into reduced airfares, stimulating passenger demand in India's highly price-sensitive aviation market.

The FIA stated that bringing ATF under GST would eliminate cascading taxation, ensure a uniform tax structure across States, improve airline liquidity, reduce working capital requirements and enhance the long-term financial sustainability of the aviation sector.

It also said the move would promote fuel-efficient operations while supporting tourism, cargo, logistics and regional connectivity.

Additionally, the industry body said that a higher GST rate such as 18 per cent could create an inverted duty structure requiring continuous government refunds, whereas a 5 per cent rate would align with the GST applicable on economy class air tickets and avoid structural tax distortions.

www.thehindubusinessline.com, dt. 08-07-2026