The Delhi government has announced a sharp reduction in Value Added Tax (VAT) on aviation turbine fuel (ATF), bringing it down from 25 per cent to 7 per cent for the next six months. The decision was cleared during a Cabinet meeting led by Chief Minister Rekha Gupta. It also comes a day after the Maharashtra government announced a similar reduction in VAT for aviation fuel.
The move comes as airlines continue to face rising operational costs and uncertainty caused by the ongoing West Asia crisis.
Why has Delhi reduced VAT on ATF?
The Delhi government believes the tax reduction will support the aviation sector, improve connectivity and encourage business activity linked to tourism and trade.
In a post shared on X, the Delhi Chief Minister’s Office said the reduced VAT rate is intended to provide relief to passengers and make air travel “more convenient and affordable”. The government also said the move is expected to support trade, investment and employment growth in the national capital.
PTI reported that the decision could lead to a revenue loss of around Rs 985 crore for the Delhi government. Despite the expected hit to revenue, the government decided to proceed with the relief measure considering the pressure on airlines due to volatile global fuel prices.
Chief Minister Rekha Gupta said ATF contributes nearly 40 per cent to an airline’s total operating expenses and higher fuel taxes eventually impact ticket prices.
International jet fuel prices rose earlier this month
The decision also comes weeks after jet fuel prices for international airlines were increased for the second consecutive month. According to a PTI report published on May 1, Aviation Turbine Fuel prices for international carriers were raised by 5.33 per cent in Delhi after global energy prices moved upward.
State-owned oil companies increased the ATF price for international airlines by USD 76.55 per kilolitre, taking the rate to USD 1,511.86 per kilolitre in the national capital. However, there was no change in fuel prices for domestic airlines at that time.
What did Civil Aviation Minister Ram Mohan Naidu say?
Civil Aviation Minister Ram Mohan Naidu Kinjarapu said in a post on X that the aviation sector is currently facing issues such as “air space closures, uncertain operations, spike in ATF prices”.
He said the Centre has already introduced steps such as lowering airport charges, capping ATF prices for domestic scheduled operators and extending support through the Emergency Credit Linkage scheme.
The minister noted that VAT charged by states on aviation fuel remains one of the major costs for airlines. He added that the Ministry of Civil Aviation has been in touch with several state governments to push for lower VAT rates during the present crisis.
Maharashtra also cuts aviation fuel VAT
Naidu also thanked the Maharashtra government and Chief Minister Devendra Fadnavis after Maharashtra reduced VAT on ATF from 18 per cent to 7 per cent.
According to the minister, Maharashtra handles nearly 75 million passengers annually across its 16 operational airports. He said the lower VAT rate would help airlines manage costs and “keep the airfares in check” despite rising global challenges.
How can passengers benefit from this move?
Lower taxes on aviation fuel are expected to reduce operating expenses for airlines flying from Delhi. Industry observers believe the move may help carriers control costs better and could eventually support more stable airfare pricing if fuel prices remain volatile globally.