ATF and Gas Might Be Added under the GST Bracket
GST Revenue

According to financial sources, chances of including Aviation Turbine Fuel (ATF) and natural gas under the GST bracket has increased. The government is considering this move because when GST 2.0 goes live, it will have restricted exemptions and fewer rates.

For the first time, natural gas and ATF are the two petroproducts which are likely to be included in GST. The Ministry of Petroleum and Natural Gas (MOP&NG) has already placed a request for the inclusion of petroleum products under GST. The Finance Ministry has started preparing for the following round of GST Council discussions with a proposal to include ATF and natural gas into GST. 

Initially, the government excluded five of the petroleum products (petrol, crude oil, ATF, natural gas, diesel) from being within the GST bracket but included petroleum products such as kerosene, naphtha, and cooking gas in the new regime. This resulted in companies facing issues since they had to comply with the old as well as the new tax regimes. Furthermore, input tax credit (ITC) cannot be transferred within the two systems.

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The inclusion of jet fuel under GST would qualify airlines to claim ITC on the GST paid, thereby lowering the effective cost. Likewise, when GST is levied on natural gas, it would lessen the tax burden on state-operated oil companies as they will be able to claim ITC on taxes paid for services and inputs.

Financial experts have mentioned that the price of ATF would decrease if it is placed within the 18% GST bracket and a surcharge of any other kind is not levied. With the fuel cost coming down, the air ticket fare is going to be cheaper for air-travellers. It will also prove to be beneficial for corporate travellers as they will be able to claim ITC on GST paid, in addition to their effective tax rate coming down. 

Including natural gas might not be a challenging task for the GST Council since it is mostly a product which is industrial. Hence, a switchover to the new tax regime might not be difficult. The impact on revenues for the states will also be low concerning this switchover.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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