Aviation Turbine Fuel (ATF) will continue to remain outside the Goods and Services Tax (GST) framework after several states opposed the proposal during discussions at the GST Council, the Civil Aviation Ministry informed Parliament. The decision means airlines will continue to pay state-level value-added tax (VAT) on aviation fuel instead of receiving the benefits of a uniform GST structure.

The proposal to include ATF under GST was discussed during the 55th GST Council meeting held in December 2024. However, the move could not receive consensus support as multiple state governments raised objections over bringing aviation fuel under the indirect tax regime.

Following the lack of agreement, the existing taxation system will remain unchanged. ATF will continue to be taxed outside the GST structure, with states retaining the authority to levy VAT on aviation fuel. Tax rates currently differ from one state to another, creating variations in fuel costs for airlines operating across different regions.

Also Read: Akasa Air And BPCL Sign Deal For Sustainable Aviation Fuel

Airlines have consistently demanded the inclusion of ATF under GST, arguing that it would help reduce their operational expenses. Since aviation fuel is among the biggest cost components for carriers, bringing it under GST would allow airlines to claim input tax credits and potentially lower overall fuel expenditure.

The Civil Aviation Ministry informed the Lok Sabha that the GST Council considered the proposal but could not make a decision due to opposition from several states. Tax-related decisions under the GST system require agreement between the Centre and state governments, making consensus essential for any major changes.

The latest clarification indicates that there has been no change in the government’s policy regarding aviation fuel taxation. ATF will continue to remain outside the GST regime until the GST Council reaches an agreement on the issue, despite continued demands from the aviation industry for reforms.

Also Read: E20 Fuel Cannot Be Cheaper Than Petrol, Centre Clarifies