New Delhi [India], May 15 : The Maharashtra government has reduced the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 18% to 7%, a move expected to provide relief to airlines and passengers amid rising operational costs due to the ongoing West Asia crisis.
The reduction came into effect on Friday, Union Civil Aviation Minister Kinjarapu Ram Mohan Naidu said in a post on X.
Naidu thanked Maharashtra Chief Minister Devendra Fadnavis for the "timely intervention," noting that the decision would help keep airfares in check at a time when global challenges are pushing costs upwards.
"Maharashtra State has 16 operational airports and the highest annual air traffic amongst the states, of around 75 million passengers, with daily passengers of around 2 lakhs. This reduction in VAT will help the flight operations in all these airports and benefit the large number of passengers," he said.
The Indian aviation sector has been grappling with airspace closures, uncertain operations and a sharp spike in ATF prices following the escalation of tensions in West Asia. ATF typically accounts for 30-40% of an airline's operating costs, making it one of the largest expense heads for carriers. With crude oil prices volatile due to geopolitical risks, airlines have faced pressure on margins and fare structures.
The Centre has already introduced several measures to cushion the impact. Under the leadership of Prime Minister Narendra Modi, the government has capped ATF prices for domestic scheduled operators, reduced airport charges, and extended support through the Emergency Credit Linkage scheme, Naidu said.
However, VAT on ATF, which is levied by state governments, remains a significant cost component and varies widely across states, often ranging from 4% to 30%.
The move is also expected to improve the competitiveness of Maharashtra's airports compared to those in neighbouring states with lower VAT rates.
The reduction comes at a time when airlines are already under strain due to higher input costs and disrupted international routes. Industry experts say such state-level interventions can provide immediate relief while global conditions stabilise. Naidu said the ministry continues to work with other states to encourage similar measures to support the aviation sector during volatile periods.