Delhi Cuts ATF Tax to Boost Aviation Sector
VAT on aviation fuel reduced from 25% to 7%, airfares may ease in coming months
- Delhi slashes ATF VAT from 25% to 7%
- Move aimed at reducing airline operating costs
- Government expects impact of nearly Rs 985 crore on revenue
- Decision to remain effective for six months initially
GG News Bureau
New Delhi, 16th May: The Government of Delhi has reduced Value Added Tax on Aviation Turbine Fuel from 25 per cent to 7 per cent in a move aimed at lowering airline operating costs and strengthening Delhi’s position as a major aviation hub.
The decision was approved by the Delhi Cabinet on Friday and will remain effective initially for six months.
Announcing the decision, Rekha Gupta said the aviation sector has been facing increasing operational pressure due to global geopolitical tensions and fluctuating crude oil prices.
“ATF accounts for nearly 40 per cent of the total operational cost of airlines. High tax rates directly impact ticket prices and the financial health of the aviation sector,” Gupta said.
Aviation Turbine Fuel is one of the largest cost components for airlines, and state-level taxation significantly affects fuel prices across India.
Despite the implementation of the Goods and Services Tax in 2017, ATF remains outside the GST framework, allowing states to levy separate VAT rates.
Delhi previously imposed one of the highest VAT rates on aviation fuel in the country.
Industry experts said the reduction in VAT is expected to lower operational costs for airlines operating out of the Indira Gandhi International Airport, although there has been no immediate announcement regarding airfare reductions.
Analysts noted that ticket prices also depend on passenger demand, seasonal travel trends, competition and international crude oil prices.
The Delhi government said the move is intended to support aviation, tourism, logistics and trade sectors while helping the capital remain competitive with states that have already lowered ATF taxes.
According to government estimates, nearly eight crore passengers travelled through Delhi’s airport during 2024-25, making it the busiest airport in the country.
Officials estimated that the tax reduction could have a revenue impact of around Rs 985 crore.
