The Delhi government on Saturday announced a sharp reduction in Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), cutting the levy from 25% to 7%, according to the Chief Minister’s Office (CMO). The decision was taken during a Cabinet meeting chaired by Chief Minister Rekha Gupta.

The move is expected to provide major relief to airlines operating out of the national capital, as ATF accounts for nearly 30-40% of airline operating costs. Industry experts believe the tax cut could help airlines manage rising fuel expenses and potentially stabilise airfares for passengers.

Delhi was among the states imposing the highest VAT on jet fuel, alongside Tamil Nadu and West Bengal. The tax reduction comes amid rising global crude oil prices and disruptions linked to the West Asia crisis, which have significantly increased aviation fuel costs in recent months.

The development follows a similar decision by the Maharashtra government, which recently reduced ATF VAT from 18% to 7% for six months to support the aviation sector and curb rising airfares.

Meanwhile, the Centre on May 15 revised the windfall tax structure on fuel exports, introducing a ₹3 per litre levy on petrol exports while easing duties on diesel and aviation turbine fuel (ATF). The revised rates came into effect from May 16. 

According to a Finance Ministry notification, the export duty on diesel has been reduced from Rs 23 per litre to ₹16.5 per litre, while the levy on ATF exports has been cut from ₹33 per litre to ₹16 per litre. The government also clarified that the road and infrastructure cess on petrol and diesel exports will remain nil, and there will be no change in duties on fuel meant for domestic consumption. 

This is the first time since the escalation of the West Asia conflict that a special additional excise duty (SAED) has been imposed on petrol exports. The move comes as the government seeks to maintain adequate domestic fuel supplies and prevent exporters from benefiting disproportionately from soaring global prices. 

The export duty framework has undergone several revisions in recent months. On March 26, the government imposed duties of ₹21.5 per litre on diesel and ₹29.5 per litre on ATF exports. These rates were sharply raised on April 11 to ₹55.5 per litre for diesel and ₹42 per litre for ATF before being partially rolled back on April 30. 

The taxes were introduced in response to volatility in global crude oil markets triggered by the US-Israel-Iran conflict. Following military strikes on Iran by the United States and Israel on February 28 and Tehran’s retaliation, crude oil prices surged from nearly $73 per barrel to above $100 per barrel in recent weeks. 

The ministry said the windfall tax is aimed at discouraging excessive exports and ensuring sufficient availability of petroleum products within the country during the ongoing geopolitical crisis. 

Published on: May 16, 2026 7:57 PM IST