However, airlines will continue to pay an 11 per cent excise duty on ATF used for flying aircraft domestically. In a notification dated July 7, the finance ministry said the exemption from both basic excise duty and special additional excise duty would be applicable retrospectively from July 1.
Clearing the air on a previous notification imposing excise duty on Aviation Turbine Fuel (ATF), the finance ministry has issued a new notification saying that domestic airlines flying overseas will be exempted from paying excise duty on jet fuel. This brings the domestic airlines at parity with international carriers.
However, airlines will continue to pay an 11 per cent excise duty on ATF used for flying aircraft domestically. In a notification dated July 7, the finance ministry said the exemption from both basic excise duty and special additional excise duty would be applicable retrospectively from July 1.
Prior to July 1, domestic airlines did not pay excise duty on ATF when flying internationally but after the notification that imposed an export duty on ATF, petrol and diesel, oil marketing companies considered the exemption to be withdrawn. Airlines had subsequently approached the government citing oil marketers denying excise duty exemption to them for flying abroad since July 1.
The finance ministry’s clarification that excise duty would not be applicable on domestic carriers for foreign flights brings them back at par with foreign airlines for which the fuel is exempt from duty as per the Chicago convention.
KPMG tax partner Abhishek Jain said: “…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 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,” he added.
Source:indianexpress.com