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In a relief to airlines, the finance ministry has said the excise duty on aviation turbine fuel (ATF), or jet fuel, which was introduced last week, will not apply on foreign-going flights. The move brings domestic carriers at par with foreign airlines for which the fuel is exempt from duty.

“The central government, being satisfied that it is necessary in the public interest so to do, hereby exempts aviation turbine fuel…from the whole of the special additional excise duty,” the finance ministry has said. It also said the special additional duty will not apply “when such goods are cleared for exports or supplied as fuel to foreign going aircraft”.

Through a notification, the ministry said ATF supplied as fuel to domestic carriers on international routes would continue to be exempted from basic excise duty from July 1. Confusion arose on the viability of the excise duty on domestic airlines for their foreign flights after the government on July 1 slapped a Rs 6 per litre special additional excise duty (SAED) or duty on the export of jet fuel.

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 Aviation Turbine Fuel (ATF) they purchase for running overseas flights.

Abhishek Jain, tax partner at KPMG, 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.”

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.

Jet fuel prices on June 1 were also cut by 1.3 per cent — the first reduction after 10 rounds of price hikes — on softening international crude oil rates.

The price of aviation turbine fuel (ATF) — the fuel that helps aeroplanes fly — has been reduced by Rs 1,563.97 per kilolitre, or 1.27 per cent, to Rs 1,21,475.74 per kl (Rs 121 per litre) in the national capital, according to a price notification of state-owned fuel retailers. This was the first reduction after 10 rounds of price increases this year. Rates were hiked by Rs 6,188.25 per kl, or 5.29 per cent, on May 16, to a record high level of Rs 1,23,039.71 per kl.

Jet fuel prices are revised on the 1st and 16th of every month, while petrol and diesel rates are revised daily, based on equivalent rates in the international market. ATF in Mumbai now costs Rs 120,306.99 per kl, while it is priced at Rs 126,369.98 in Kolkata and Rs 125,725.36 in Chennai.

Rates differ from state to state, depending on the incidence of local taxation.

(With inputs from PTI)

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