Aviation turbine fuel or ATF and natural gas are likely to be among the first set of petro products to be included in the goods and services tax (GST) ahead of an earlier agreed schedule.
Sources said the ministry of petroleum and natural gas has already put a request for their inclusion in the indirect tax system and the finance ministry is studying whether the proposal could be placed before the GST Council at an early date. The next meeting of GST Council is slated in January.
As part of its efforts to build consensus with states on GST launch, the Centre had earlier decided to exclude five petroleum products — crude oil, petrol, diesel, ATF and natural gas — from the list of items placed under GST, but included products such as cooking gas, kerosene and naphtha in the new regime.
A member of the council had earlier told Financial Chronicle that though petroleum products were not kept out of GST, its inclusion in the regular tax system may have to wait at least for a year by when the revenue impact of GST would be better known.
“ATF would be the first among petro products still outside GST (to come under the indirect tax regime). Inclusion of natural gas could be next or may be done simultaneously with ATF,” said a finance ministry official privy to the development.
The inclusion of jet fuel would allow airlines to take input tax credit on the GST paid, thus bringing down the effective cost.
Similarly, GST levy on natural gas would help state-run oil companies such as ONGC, IOC, BPCL and HPCL to save tax burden to the tune of Rs 25,000 crore as they would get credit on taxes paid for inputs and services. Tax credits are not transferable between the two different taxation systems.
Similarly, GST levy on natural gas would help state-run oil companies such as ONGC, IOC, BPCL and HPCL to save tax burden to the tune of Rs 25,000 crore as they would get credit on taxes paid for inputs and services. Tax credits are not transferable between the two different taxation systems.
Experts said that ATF price would come down if it is kept in the 18 per cent GST bracket and no other surcharge is levied. Lower fuel cost would mean ticket prices going down for air travellers. It will benefit corporate travellers the most as they would be able to claim credit on GST paid besides their effective tax rate also coming down.
As fuel accounts for nearly 30-40 per cent of an airline’s operating cost, its addition into GST would bring significant gain for the sector. Besides improving the bottomline of airlines, it will also give major boost to the government’s ambitious plan to enable every common man to fly by providing air travel at affordable price.
“Corporate travellers would be able to take credit of GST paid on air travel. For them, apart from lower ticket price, the effective GST rate would also come down. Overall, it would be beneficial both for airlines and air travellers,” said Anoop Kalavath, senior director at Deloitte India.
He noted that the potential benefits are based on the assumption that ATF is placed under 18 per cent tax bracket and no other surcharge is levied. Also, airlines are allowed to take input tax credit.
Kalavath added that while most other sectors of the economy have got rid of the cascading effect of taxation the airline sector continues to bear it.
Two senior airline executives claimed that ATF price in India is the highest among the neighbouring aviation hubs such as Dubai and Singapore.
The retail price of ATF carries high profit margins of oil companies, an excise duty of 8.24 per cent by the Centre and sales tax levied by various states ranging from 4 per cent to 30 per cent. The average of state sales tax stands at around 22 per cent.
Inclusion of gas would not pose a challenge for the GST Council as it is largely an industrial product where a switchover to new taxation would not be difficult. The revenue implication for the states is also low as regards this switchover.
Earlier, oil minister Dharmendra Pradhan had also made a strong case for inclusion of natural gas in GST. He is also in favour of bringing other petro products under GST gradually.
Ficci has also pitched for the inclusion of natural gas in the new indirect tax regime so as to help producers contain cost and aid in moving towards a gas-based economy.
Gas sales, including CNG and piped gas supplies, attract VAT ranging from 5-12 per cent.
http://www.mydigitalfc.com/plan-and-policy/jet-fuel-natural-gas-may-come-under-gst-soon
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