New Delhi: Delhi and Maharashtra have sharply reduced taxes on aviation turbine fuel in a major relief move for airlines struggling with soaring global fuel prices, rising operational costs and supply chain disruptions.
The governments of New Delhi and Maharashtra announced cuts in Value Added Tax on aviation turbine fuel, bringing the rate down to seven per cent at India’s two largest aviation hubs. Delhi reduced VAT from 25 per cent to seven per cent for six months, while Maharashtra lowered Mumbai’s ATF VAT from 18 per cent to seven per cent for domestic operations.
The move comes as airlines face mounting pressure following a sharp rise in global jet fuel prices linked to tensions involving Iran and disruptions around the Strait of Hormuz. According to industry estimates, fuel costs now account for nearly 55 to 60 per cent of airline operating expenses, compared to around 30 to 40 per cent earlier.
The tax reduction is expected to significantly improve operating economics because Indira Gandhi International Airport and Chhatrapati Shivaji Maharaj International Airport together handle a major share of India’s passenger traffic, long haul connectivity and aircraft refuelling activity.
Airlines such as Air India and IndiGo are expected to benefit the most because of their extensive hub operations in Delhi and Mumbai. Industry experts believe the VAT cuts could also reduce the need for “fuel tankering”, a practice where airlines carry extra fuel from lower tax airports to avoid expensive refuelling at major hubs.
Despite the relief, passengers may not see immediate reductions in ticket prices. Analysts say airfare trends continue to be driven mainly by demand supply dynamics, aircraft shortages and operational constraints rather than direct fuel cost pass through.
The aviation industry has also renewed demands for bringing aviation turbine fuel under the GST regime to create a uniform tax structure nationwide. Currently, ATF remains outside GST, leading to varying VAT rates across states and increasing operational complexity for airlines.
While the tax cuts are expected to improve airline margins and route viability, both Delhi and Maharashtra governments have acknowledged substantial revenue losses from the decision as they seek to strengthen their positions as competitive aviation hubs.
