India has exempted domestic airlines running international flights from 11 percent basic excise duty on jet or aviation turbine fuel (ATF) bought from oil marketing companies.
The Finance Ministry said that ATF supplied as fuel to domestic carriers on international routes would remain exempted from basic excise duty from July 1.
The government had imposed a Rs 6 per litre special additional excise duty on the export of petrol and aviation turbine fuel (ATF). But the domestic airlines had asked for clarification on the applicability of the duty for their foreign flights.
Some oil companies were of the view that with the levy of export duty, domestic carriers would be liable to pay 11 percent basic excise duty for the ATF they purchase for overseas flights.
Domestic airlines are already bleeding due to steep ATF rate hikes.
The clarification brings domestic airlines back on par with foreign airlines for whom fuel is exempt from duty as per the Chicago convention.
”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,” KPMG Tax Partner Abhishek Jain told PTI.
“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,” Jain added.