Govt slashes VAT on aviation turbine fuel from 25% to 7%

The Rekha Gupta Government on Saturday decided to reduce the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25 per cent to 7 per cent. According to Chief Minister Rekha Gupta, the decision to reduce VAT on ATF was taken at the Cabinet meeting.

“Delhi Government has decided to reduce the value-added tax (VAT) on aviation turbine fuel (ATF) from the existing 25 per cent to 7 per cent, a move which is likely to benefit the airlines and common passengers,” the official statement said.

This comes a day after Maharashtra reduced Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) to 7 per cent from 18 per cent for six months, effective May 15, to ease fuel costs for airlines amid high global crude prices and West Asia-related disruptions. The chief minister said the concessional rate will initially remain in force for a period of six months. The decision, taken in the interest of both the nation and Delhi, may result in an estimated revenue loss of nearly `985 crore for the Government.

Sharing details of the Cabinet decision, the Chief Minister said that although the GST regime has been in force across the country since 2017, States still retain the authority to levy VAT on six petroleum products listed under the State List of the Seventh Schedule of the Constitution, including Aviation Turbine Fuel. This is the reason why ATF continues to remain outside the purview of GST.

The Chief Minister informed that airlines pay VAT and central excise duty on ATF while purchasing fuel from oil companies. VAT on ATF, which is levied by state governments, remains a significant cost component and varies widely across states. ATF, which accounts for nearly 30-40 per cent of airline operating costs, has come under sustained price pressure due to geopolitical tensions, supply chain disruptions, and volatility in global crude oil markets, particularly amid Middle East conflicts and periodic airspace restrictions. The elevated fuel costs have significantly impacted airline balance sheets, forcing carriers to adjust fares, especially on high-demand domestic routes.

She further stated that VAT on ATF is estimated to generate annual revenue of around `1,368 crore, accounting for nearly 19 per cent of the Delhi Government’s total annual VAT collection. As a result, VAT on ATF continues to remain a significant source of revenue for the Delhi Government. The chief minister also clarified that Delhi Airport currently remains the country’s largest aviation hub.

During 2024-25, nearly 8 crore passengers were recorded at the Indira Gandhi International Airport, the highest in the country. She said that the Delhi Government remains committed to promoting aviation, tourism, trade, logistics, and investment and is continuously working to maintain the national capital as the country’s strongest economic and connectivity centre. The Chief Minister reiterated that the Government’s decision will remain in force for six months for the time being.

On Friday, Maharashtra reduced the VAT on ATF from 18 per cent to 7 per cent, a move expected to provide relief to airlines and passengers amid rising operational costs due to the ongoing West Asia crisis. Union Civil Aviation Minister Kinjarapu Ram Mohan Naidu thanked Maharashtra Chief Minister Devendra Fadnavis for the “timely intervention,” noting that the decision would help keep airfares in check at a time when global challenges are pushing costs upwards.

The Indian aviation sector has been grappling with airspace closures, uncertain operations and a sharp spike in ATF prices following the escalation of tensions in West Asia. ATF typically accounts for 30-40 per cent of an airline’s operating costs, making it one of the largest expense heads for carriers.