In the Goods and Services Tax (GST) Council meeting, the central government rejected a long-standing proposal from the airline industry to include aviation turbine fuel (ATF) under the GST regime. This decision maintains the status quo, where state governments independently decide the tax rates for ATF.
Airlines have been lobbying for ATF to be taxed under GST to standardise levies across the country, simplifying the taxation process and reducing costs. However, state governments have opposed the move, fearing a significant loss of revenue.
“States do not want ATF to be brought under GST just like petrol and diesel,” said Finance Minister Nirmala Sitharaman, who chaired the GST Council meeting that includes representatives from state governments.
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New GST Rule for Sale of Used Vehicles
The GST Council announced a new taxation rule for the sale of used or old vehicles, including electric vehicles, by registered sellers. These sales will now attract an 18 per cent GST. However, transactions between individuals selling vehicles directly will remain exempt from this tax.
In a decision that disappointed many advocating for wider insurance adoption, the council deferred a proposal to reduce taxes on life and health insurance premiums. Sitharaman stated that the matter requires further deliberation, delaying a move seen as crucial for increasing insurance penetration in the country.
Implications of the GST Council’s Decisions
The rejection of the aviation fuel proposal highlights the ongoing tension between state revenue autonomy and national-level tax reforms. For the airline industry, this means continued challenges with varying ATF taxes across states, affecting operational costs.
On the other hand, the new GST rule for used vehicles provides clarity for registered sellers, while keeping peer-to-peer transactions untaxed. The delay in insurance tax reductions underscores the complexity of balancing fiscal policies with social welfare priorities.
As these decisions unfold, the GST Council’s approach reflects a cautious balance between reform and the diverse economic interests of state and central governments.
(With agency inputs)