The Maharashtra government has reduced Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) to 7 per cent from 18 per cent for a period of six months, effective from May 15. This move aims to provide relief to airlines grappling with high fuel costs. The civil aviation ministry stated that the decision by the Maharashtra state government will help stabilize airfares that have increased due to the West Asia crisis and peak summer travel demand.
Chief Minister's Announcement
Announcing the decision on X on Friday, Maharashtra Chief Minister Devendra Fadnavis said the state government had decided to provide temporary relief to the aviation sector by reducing VAT on ATF. Civil Aviation Minister Kinjarapu Rammohan Naidu welcomed the move and posted on X: "Due to the West Asia crisis, the Indian aviation industry is facing issues such as airspace closures, uncertain operations, and a spike in ATF prices."
Impact on Airfares
Naidu added that the reduction in VAT will help keep airfares in check while global challenges continue to push airfares upwards. He emphasized that the VAT cut would lower operational costs for airlines and strengthen Maharashtra's position as a key aviation hub. The decision follows discussions between the Centre and states with high VAT rates on jet fuel, amid a sharp rise in ATF prices linked to geopolitical tensions and supply concerns.
ATF accounts for nearly 30-40 per cent of an airline's operating costs, making taxation on jet fuel a key concern for carriers. Mumbai, one of the country's busiest aviation hubs, is expected to be among the major beneficiaries of the tax cut.
Industry Reactions
Industry executives said the reduction is expected to lower operating costs for airlines and could help stabilize airfares during the six-month period. The aviation industry has long sought inclusion of ATF under the Goods and Services Tax (GST) regime to bring uniform taxation across states.
