The Delhi government has reduced VAT on aviation turbine fuel (ATF) from 25% to 7%, following Maharashtra’s earlier move. (a file photo) | Photo Credit: KACPER PEMPEL

After Maharashtra, the Delhi Government Saturday lowered Value Added Tax (VAT) on jet fuel (Aviation Turbine Fuel or ATF) to 7 per cent from 25 per cent. This is expected to provide significant relief for airlines, which incur over 40 per cent of their operating costs.

Six-month concessional rate with revenue impact

“The concessional rate will initially remain in force for a period of six months,” Rekha Gupta, Chief Minister of Delhi, said. Further, the decision, taken in the interest of both the nation and Delhi, may result in an estimated revenue loss of nearly ₹985 crore for the Government, she added. Earlier, the Maharashtra government reduced ATF VAT to 7 per cent from 18 per cent to support airlines and help keep airfares stable amid rising fuel costs.

Policy aligned with connectivity and GST structure

Meanwhile, CM Gupta said that the decision to cut duty has been taken in line with the Prime Minister’s emphasis on strengthening connectivity and economic activity, as well as with the objective of maintaining economic competitiveness, providing relief to the aviation sector, promoting tourism and logistics activities, and strengthening the national capital’s position as one of the country’s leading aviation and connectivity hubs. Sharing details of the Cabinet decision, the Chief Minister said that although the GST regime has been in force across the country since 2017, States still retain the authority to levy VAT on six petroleum products listed under the State List of the Seventh Schedule of the Constitution, including Aviation Turbine Fuel. This is the reason why ATF continues to remain outside the purview of GST.

ATF tax burden and airline operating costs

The Chief Minister informed that airlines pay VAT and central excise duty on ATF while purchasing fuel from oil companies. ATF accounts for nearly 40 per cent of airlines’ total operational costs. Consequently, high tax rates directly affect air ticket prices and the financial health of the aviation sector. Recent global geopolitical developments have further intensified these challenges. She further stated that VAT on ATF is estimated to generate annual revenue of around Rs 1,368 crore, accounting for nearly 19 per cent of the Delhi Government’s total annual VAT collection. As a result, VAT on ATF continues to remain a significant source of revenue for the Delhi Government.

Delhi airport growth and aviation hub push

Gupta also highlighted that Delhi Airport currently remains the country’s largest aviation hub. During 2024-25, nearly 8 crore passengers were recorded at the Indira Gandhi International Airport, the highest in the country. She said that the Delhi Government remains committed to promoting aviation, tourism, trade, logistics, and investment, and is continuously working to maintain the national capital as the country’s strongest economic and connectivity centre.

Published on May 16, 2026