The Finance Ministry has exempted domestic carriers from paying 11% basic excise duty on aviation turbine fuel (ATF) when it is used to refuel aircraft for international flights, thus restoring parity with foreign carriers.
In a notification issued on Thursday, the Ministry also made clear that the special additional duty on exports for ATF would not apply “when such goods are cleared for exports or supplied as fuel to foreign-going aircraft”.
Domestic airlines had demanded the rollback of the duty after Indian Oil Corp. started levying 11% basic excise duty on ATF used to fuel aircraft operating international flights following the government notification imposing the special additional duty on the export of petroleum products, including ATF, starting July 1.
The domestic carriers had raised the issue at a meeting with Civil Aviation Minister Jyotiraditya Scindia on Tuesday.
“The potential levy of excise duty on ATF supplies to a foreign-going aircraft has proactively been exempted by the government, with no excise duty (basic or special) being applicable on such supplies,” said Abhishek Jain, Tax Partner at KPMG. “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”, Mr. Jain added.