Delhi & Mumbai Lower Aviation Turbine Fuel Tax – A Huge Relief to Aviation.
Key Tax Cuts: What You Need to Know
ATF VAT Reduced To 7% For Six Months. VAT on Aviation Turbine Fuel (ATF) in Delhi has been slashed by the Government of Delhi to 7% from 25% for six months. Thus, ATF VAT in Delhi has been brought at par with that of Mumbai.
Mumbai: Maharashtra slashes VAT on ATF to 7% for domestic flights temporarily.
Why This Matters for Airlines “Experts expect that even marginal reduction in tax at India’s two largest airports would enhance operating economics of airlines considerably. In terms of passenger traffic also, these two airports account for largest chunk in the country and in terms of refueling of aircraft, too it is a huge number. Hence, even marginal reduction in tax at these two airports can result in substantial savings for airlines,” said Kapil Dev, partner (indirect tax), BMR & Associates.
The Fuel Crisis: An Industry in Distress
The fuel crisis in the aviation sector is creating huge problems for airlines to operate even on short haul flights. The fuel costs account for 55% to 60% of the operating cost of airlines, a huge jump from 30% to 40% earlier when there were no conflicts. As global jet fuel price has shot up from $99.4 per barrel in January this year to $162.89 per barrel in February this year and Indian rupee has depreciated sharply against dollar, fuel price has increased by more than 60% in last two months. Petrol price in India has also increased by over 55% in last two months. The ATF consumption in India has also increased to 764 thousand metric tonnes in February this year, a growth of 12.55% over 680 thousand metric tonnes in corresponding month last year as per Petroleum Planning and Analysis Cell (PPAC).
Tax Relief’s Broader Implications
This is the right time for the tax reduction as this benefits Air India, IndiGo and SpiceJet, which operate majority of the flights in the country. ATF consumption in India for the month of February 2026 was reported to be around 764 thousand metric tonnes by the Petroleum Planning and Analysis Cell (PPAC).
Reshaping Airline Fuel Strategies
The VAT cuts in Delhi and Mumbai would influence the way airlines manage their fuel refueling, with them possibly reducing the amount of fuel that they would ‘tanker’ and in some cases carry additional fuel from other airports for flights departing from Delhi and Mumbai airports. For airlines such as IndiGo, Air India and SpiceJet, which operate large number of flights within India, the VAT cuts could translate into better fuel efficiency and route economics.
Expectation of Cost Savings
Even if the cut in VAT is marginal, the reduction in taxes by the two biggest aviation hubs in the country will translate into considerable annual savings for airlines taking into account the volume of fuel refueled at Delhi and Mumbai airports. However, this reduction will not bring relief to airlines in the current scenario of depreciating rupee and high oil price environment.
Will Passengers Benefit from Lower Fares?
Airlines in Indian market do not reduce air fares even if they end up saving a lot on fuel cost. Air fares in the country are determined by supply and demand in the market and thus there will not be any impact on air fares in the immediate future due to decreased VAT on ATF. However, this move will be of great help to airlines of the country in the long run as it will increase their operating economics.
Revenue Implications for Delhi and Maharashtra
Sustaining and enhancing the two cities’ competitive positions as aviation hubs would be extremely beneficial for Delhi and Maharashtra in the long run. This would come at a huge cost to the states’ revenue though – of about Rs 985 crore and Rs 550-600 crore respectively over the next six months.
A Call for GST Inclusion
However, the relief recently provided in the taxes of ATF would only emphasize the need to have ATF included in the Goods and Services Tax (GST) regime. The Goods and Services Tax was launched in India on July 1, 2017. Since then, Aviation Turbine Fuel has been kept out of the GST regime and thus all states and union territories have their own VAT structures on ATF. Consequently, fuel costs of airlines for their operations from different airports would vary significantly.
Thus while these cuts at the two biggest aviation hubs of the country are a big relief to airlines and the industry as a whole; there are bigger challenges confronting the sector and these would need to be addressed in the long run for consumer benefits to be lasting.