Govt rolls back additional excise burden on jet fuel for int’l flights

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NEW DELHI: Cash-strapped Indian carriers have been spared the additional excise burden imposed just lately imposed on aviation turbine fuel (ATF) being tanked up for worldwide flights. The Union finance ministry had on June 30, 2022, issued a notification that, amongst different issues, levied an additional excise of Rs 6 per litre on ATF exports (refuelling for worldwide flights) and upended the exemption from 11% primary excise responsibility (BED). These two additional burdens have now been withdrawn for airways.
Abhishek Jain, KPMG accomplice (oblique tax) mentioned: “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. This alignment to the taxabilty 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.”
The finmin corrigendum issued on Thursday (July 7) reads: “In the notification of the government of India, ministry of finance (department of revenue) No. 08/2022-Central Excise, dated the June 30, 2022, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 496(E), dated the 30th June, 2022, for “when such goods are cleared for exports” learn “when such goods are cleared for exports or supplied as fuel to foreign going aircraft”.
ATF for home flights is among the many most costly in India on account of two causes — excessive base worth by oil advertising and marketing firms who will not be capable of elevate politically delicate petrol, diesel and cooking fuel costs and thereby jet fuel sees a disproportionate improve. And then excessive central and state taxes on the bottom worth results in very costly ATF.
Struggling to outlive Indian carriers have lengthy been requesting excise responsibility discount on jet fuel and in addition that jet fuel be introduced underneath GST in order that they get the good thing about enter tax credit score. ATF costs have elevated by greater than 120% since June 2021. What has added to airways’ burden is the weakening rupee as a majority of there prices like lease leases and upkeep contracts are dollar-denominated.
While no Indian airline (besides IndiGo in pre-Covid instances) had a wholesome steadiness sheet prior to now few years, the pandemic’s crippling blow had left all of them struggling to outlive. Russia’s battle on Ukraine — resulting in fuel worth hike and weakening of rupee vis-a-vis the greenback — have added to their woes.
“Airlines are not a cost plus industry. We have hardly passed on half of the enhanced increase in operating cost to passengers. Due to the increased fares, the recover in domestic traffic has taken a hit. Till the six metros reduce ATF price, not much will change for airlines in terms of survivability,” mentioned an airline official.
“The rupee weakening against the dollar by every Re 1 means an enhanced expense of Rs 75-80 crore for a mid-size airline and Rs 150-200 — crore for a large airline in India. About 65-70% of ours costs are dollar-denominated like aircraft lease/maintenance, foreign stations and GDS,” mentioned one other airline official.

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