Aviation Ministry Forms Committee to Address Additional Taxes on ATF

The Ministry of Civil Aviation has reportedly constituted a committee to justify the additional taxes levied on Air Turbine Fuel (ATF). The airline companies are required to pay additional taxes when fueling ATF at airports across the country.

At present, the additional charges are being paid in the form of ‘fuel infrastructure charges’, ‘into plane charges’ and ‘throughput charges’. The airlines attract these charges when they fuel their planes with ATF at the airport.

For example, when the airport operator bills the oil company for throughput charges, the latter escapes the charges by billing the airline company. Since the billing is done in a circuitous manner, these throughput charges attract Value Added Tax (VAT), excise duty, and Goods and Services Tax (GST). This ‘tax on tax’ ends up with the airline being overcharged.

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With the uplifting of ATF being billed obliquely, the charges attract taxes multiple times. To ensure that these multiple taxes are eliminated, the aviation ministry has formed a committee to come up with a direct billing system between the airport operators and the airlines.

The committee comprising of representatives from various oil companies, operators and airline companies, is expected to submit a report concerning the same. The government also hopes to cut costs by up to Rs.400 crore annually if the direct billing mechanism is introduced.

Any taxation on ATF directly influences the airlines as ATF constitute a considerable percentage – almost 40% – of the airline’s annual expenditure. If the airport operators invoice the charges directly to the airline companies, VAT or excise duty will not be applicable as the airline will have availed Input Tax Credit (ITC) for the GST paid