In a sweeping reset of fuel taxation, the Finance Ministry has introduced a fresh levy framework for aviation turbine fuel (ATF), while also cutting special additional excise duty on petrol to Rs 3 from Rs 13 per litre and reduced duty on diesel to Nil per litre from Rs 10.
As part of the changes, ATF now carries a headline special additional excise duty of Rs 50 per litre, which is partially offset through exemptions, bringing the effective levy to around Rs 29.5 per litre under specific provisions.
The notifications come into effect immediately and are part of a broader recalibration of fuel export and taxation rules.
Multi-Layered Tax Framework
The gazette introduces a detailed and somewhat complex framework for ATF, spanning excise and customs changes. ATF has been removed from the purview of export rebate rules under the Central Excise framework, except for supplies to neighbouring countries by public sector oil firms.
A special additional excise duty of Rs 50 per litre has been imposed under the Finance Act framework, marking a significant headline levy. A subsequent exemption reduces the effective burden, ensuring that duty is capped at Rs 29.5 per litre in practice.
ATF is fully exempt from this additional duty for domestic use, though this exemption does not extend to exports - except when supplied to neighbouring countries. ATF used for exports or supplied to foreign-going aircraft is fully exempt from basic excise duty, providing relief to international aviation operations.
On the import side, ATF is fully exempt from the additional customs duty equivalent to the excise levy, ensuring parity in the tax structure.
What Changes For Exporters?
Alongside the duty tweaks, the government has tightened export-linked exemptions for key petroleum products, including petrol, diesel and ATF.
Specifically, exports of these fuels will no longer enjoy broad-based relief under existing excise provisions, except in clearly defined cases. This marks a tightening compared to earlier frameworks where export-oriented clearances often carried wider exemptions.
Key Exemptions Remain In Place
Importantly, the notification builds in targeted exemptions. Supplies made by public sector oil companies to neighbouring countries — including Nepal, Bhutan, Bangladesh and Sri Lanka — will continue to receive preferential treatment.
In addition, shipments that were already cleared or approved for export prior to the notification are expected to be protected from retrospective duty impact, providing relief to exporters with existing commitments.
This ensures that India's strategic energy ties with neighbouring economies remain unaffected, even as broader export rules are tightened.
These changes come at a time when global fuel markets remain volatile, and governments worldwide are recalibrating policies to safeguard domestic supply chains. For now, the exemptions for neighbouring countries and prior shipments soften the immediate blow.
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