The Delhi government has reduced the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25% to 7% for an initial period of six months. The decision was approved during a Cabinet meeting chaired by Chief Minister Rekha Gupta.
According to the Delhi government, the move aims to provide relief to airlines facing rising operational costs amid global fuel price volatility and disruptions linked to tensions in West Asia.
Relief For Airlines Amid Rising Fuel Costs
Aviation Turbine Fuel is one of the largest operational expenses for airlines, accounting for nearly 30-40% of total operating costs. Industry reports said rising crude oil prices, airspace disruptions, and geopolitical instability in the Middle East have increased financial pressure on carriers.
Officials stated that lowering VAT on ATF could help reduce fuel expenses for airlines operating from Delhi and may also help stabilize airfare prices.
Decision Follows Maharashtra’s VAT Reduction
Delhi’s move comes shortly after Maharashtra also reduced VAT on ATF to 7% from 18% for six months. Maharashtra implemented the revised rate from May 15 to support airlines amid higher aviation fuel costs.
Industry observers noted that states are increasingly reviewing aviation fuel taxation as airlines continue to face pressure from volatile fuel markets and operational disruptions.
Revenue Impact On Delhi Government
The Delhi government said the concessional VAT rate may result in an estimated revenue loss of around ₹985 crore. Officials noted that VAT on ATF contributes significantly to Delhi’s annual VAT collections.
Chief Minister Rekha Gupta said the decision was taken to strengthen Delhi’s position as a major aviation, tourism, logistics, and business hub.
IGI Airport Handles Highest Passenger Traffic
The government also highlighted the importance of Indira Gandhi International Airport as India’s largest aviation hub. According to official figures, nearly 8 crore passengers travelled through the airport during 2024-25, the highest in the country.
Officials stated that improved operating conditions for airlines could support better connectivity, tourism growth, and increased business activity in the national capital region.
ATF Remains Outside GST
Although the Goods and Services Tax (GST) system was implemented nationally in 2017, Aviation Turbine Fuel remains outside the GST framework. State governments continue to levy VAT on ATF, leading to significant tax variations across different states.
Industry reports noted that VAT on ATF across states can range from 4% to 30%, making it a key factor in airline operating costs and route planning decisions.
Comments are closed.