Govt issues corrigendum to withdraw excise on ATF for international flights

Indian Oil had begun levying 11% duty following a govt notification; ATF accounts for 40% of an airline's operating expenses

In a move that is likely to bring major relief to airlines, the government has rolled back eleven per cent excise duty on aviation turbine fuel used for international operations. The finance ministry issued a corrigendum on Thursday withdrawing the duty.

Indian Oil Corporation began levying 11 per cent excise duty on ATF which it sold for international flights. This 11 per cent duty had not been imposed on international flights before July 1. IOC started levying it following a government notification on export of ATF.

Airlines protested the decision and demanded a rollback.  While elevated crude oil prices and high taxes are hurting airlines' incomes, the excise duty levy would further impact international operations and slow down expansion, airlines argued. The issue was also raised at a meeting chaired by civil aviation minister Jyotiraditya Scinda on Tuesday.

“The July 1 decision had created an anomaly and with a new notification the fear is gone,” a senior airline executive remarked.

Abhishek Jain, tax partner, KPMG, welcomed the government move. “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 being applicable on such supplies,” he said.

ATF accounts for around 40 per cent of an airline’s operating expenses. The surge in its price has already put airlines on the back foot and there have been repeated pleas from the aviation industry to reduce taxes on the sector. Domestic ATF price has risen 78 per cent per cent from January.