The Delhi government has brought major relief for airlines and passengers as it reduced the Value Added Tax (VAT) on aviation turbine fuel (ATF) to a massive 7% from 25% on Saturday. The decision was taken during a Cabinet meeting chaired by Chief Minister Rekha Gupta.
"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," an official statement said.
ATF is used to power jet engines to fly planes.
The decision means that airlines purchasing jet fuel for their aircraft at Delhi's Indira Gandhi International Airport will have to pay lower prices from now on due to the VAT reduction.
The decision is set to majorly impact airlines operating in the national capital as they grapple with high jet fuel prices due to the energy supply disruptions in the Strait of Hormuz brought on by the Iran war.
As VAT on aviation turbine fuel is levied solely by state governments, the applicable tax rate depends on the location where the fuel is purchased rather than the flight’s destination.
Maharashtra slashes VAT on jet fuel
The development comes a day after the Maharashtra government slashed Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 18 per cent to 7 per cent for a six month period beginning May 15, aiming to reduce operational costs for airlines amid rising global crude oil prices and disruptions linked to tensions in West Asia.
ATF constitutes nearly 30 to 40 per cent of an airline’s operating expenditure and has remained under constant price pressure due to geopolitical instability, supply chain disruptions and fluctuations in global crude markets, particularly in the backdrop of conflicts in the Middle East and intermittent airspace restrictions. The rising fuel expenses have put considerable strain on airline finances, prompting carriers to revise airfares, especially on busy domestic routes.
The latest tax reduction is expected to offer relief to airlines by lowering fuel costs, improving operational efficiency and helping stabilise ticket prices during the peak summer travel season.
Industry experts believe the move could also encourage route expansion and better capacity planning by reducing variable operating costs, while strengthening aviation connectivity and enhancing the position of major airport hubs such as Mumbai and Delhi in an increasingly competitive aviation sector.
