The 55th GST Council meeting in December 2024 considered the proposal to include Aviation Turbine Fuel (ATF) under the Goods and Services Tax framework, according to the Civil Aviation Ministry's statement to Parliament. As reported by Minister of State for Civil Aviation Murlidhar Mohol in his Lok Sabha reply on August 6, several states opposed the move, following which the existing tax structure was retained. ATF is among a small group of products that continue to remain outside GST, with the proposal stalling despite being discussed at the highest policy-making level.
ATF continues to be taxed outside the GST system, with the existing tax framework retained following the GST Council's decision. According to the ministry's clarification, ATF attracts state-level value-added tax (VAT) with varying rates across different states, adding to airlines' fuel expenses. Crude oil, petrol, diesel, natural gas and ATF can be brought under GST only on the recommendation of the GST Council, making it one of the handful of products that remain outside the unified indirect tax system. Alcohol for human consumption and electricity also remain outside the GST regime.
ATF represents one of the largest cost components for airlines, and carriers have long sought its inclusion under GST to allow them to claim input tax credits and reduce operating costs. As reported by the ministry, the lack of consensus among states has prevented the implementation of this industry demand, maintaining the current tax structure where airlines cannot benefit from the GST system's input tax credit mechanisms. Airlines argue that a uniform tax structure would lower operating costs and improve efficiency by allowing input tax credit, but the status quo continues due to state opposition.
The government has implemented several measures to support the aviation sector amid high ATF costs. A one-time budgetary support of up to ₹10,000 crore for oil marketing companies (OMCs) was provided to provide ATF price stabilisation support to scheduled Indian airlines during exceptional fuel price volatility arising from the West Asia crisis. For domestic operations, ATF prices were capped at a maximum increase of 25 percent over the March 1, 2026 base price for April and May 2026. The ministry has consistently taken up the issue of high VAT on ATF with states and Union Territories, with 23 states and UTs reducing VAT on ATF since September 2021.
The ministry's statement confirms that there has been no change in policy regarding ATF's GST inclusion, with the fuel remaining outside the GST regime until the GST Council reaches a consensus on the issue. According to the ministry's clarification, tax-related decisions in the GST Council are taken through consensus between the Centre and state governments, explaining why the proposal has stalled despite industry demands for reform. Airline operating costs are influenced by several factors, including international ATF prices, foreign exchange rates, excise duties, value-added tax (VAT), lease rentals and other operational expenses, with fuel accounting for a significant share of airline costs.
