The former Finance Minister Late Arun Jaitley once famously quoted, “Hawaii chappals and Mercedes cannot be taxed at the same rate”. That was said in the context of critics led by Rahul Gandhi’s clamour for a uniform 18 per cent GST rate across the board. This obviates the fact that the classification of goods and services which even with the best of intentions is invariably subjective. Jaitley must be wriggling uncomfortably in his resting place. It is because of the fact that the Narendra Modi government wittingly kept the Aviation Turbine Fuel (ATF) cost cheaper than that of petrol and diesel.
Nowadays, it may seem as if flying planes is cheaper than driving a car in India. For this, we can only thank the recent hikes in petrol and diesel prices all over the country. These fuel prices are hitting the all-time high more regularly than ever. The rates of petrol and diesel have now have reached a level where it actually costs more than 30 per cent of aviation turbine fuel or ATF. This aviation turbine fuel or ATF is used to fly aircraft and helicopters, that is, the jets.
The petrol and diesel prices remained stable on Monday. However, Sunday was the fourth straight day when the prices of these fuels were hiked. It took the rates to a new all-time high level. Sri Ganganagar in Rajasthan remains the costliest place in India if one wants to buy fuel for his or her car or two-wheeler. Petrol price in Sri Ganganagar stands at ₹117.86 per litre, while diesel costs ₹105.95 per litre.
The aviation turbine fuel price was also hiked recently. But still, the cost of it remains much less than what petrol and diesel prices are. For reference, a litre of ATF costs just ₹79 per litre in Delhi, while petrol costs ₹105.84 for the same amount and diesel comes for ₹94.57. There is a reason as to why aviation turbine fuel price is lower than that of petrol and diesel. It is because of the way taxes on these fuels are calculated. Just like the conventional vehicle fuels, aviation turbine fuel too attracts both central and state taxes. Along with it, the prices vary from state to state due to different VAT or value-added tax rates.
The aviation turbine fuel or ATF attracts central excise of 11 per cent. Along with it, the value-added tax rates vary between zero to 30 per cent. The VAT on aviation turbine fuel is the highest in Gujarat at 30 per cent. Then it decreases from state to state. It is 29 per cent in Tamil Nadu and Bihar and 28 per cent in Karnataka. The Centre has urged all states to reduce value-added tax or VAT on ATF to not more than 4 per cent. This was done to reduce the burden on the airline companies. Even at the highest possible price, the tax on ATF is not even half of the overall rate.