Maharashtra Cuts VAT on Aviation Fuel to Support Airlines Amid Rising Costs

In a significant move to support the struggling airline industry, the Maharashtra government has slashed the VAT on aviation turbine fuel from 18% to 7%, effective until November 14. This decision comes as airlines grapple with soaring fuel costs, driven by geopolitical tensions. The central government is also negotiating with other states to lower VAT rates. Additionally, recent adjustments to export duties on diesel and ATF aim to alleviate financial pressures on the aviation sector. With fuel expenses constituting a large part of airline costs, this reduction is expected to provide much-needed relief.

By Narendra Chaudhary May 15, 2026, 14:55 IST

Maharashtra Government's VAT Reduction on Aviation Fuel

The government of Maharashtra has decided to lower the value-added tax (VAT) on aviation turbine fuel (ATF) from the current rate of 18% to 7%. This tax reduction will remain in effect until November 14. This decision comes at a critical moment as Indian airlines are facing challenges due to soaring jet fuel prices, exacerbated by ongoing conflicts in West Asia.

Previously, reports indicated that the central government was actively discussing VAT reductions on ATF with four states, including Delhi, Tamil Nadu, West Bengal, and Maharashtra, which are known for imposing the highest VAT rates on jet fuel. Earlier this month, the central authorities also reduced export duties on diesel and ATF. The Special Additional Excise Duty (SAED) on diesel was adjusted from Rs 55.5 per litre to Rs 23 per litre, while the duty on ATF was modified from Rs 42 per litre to Rs 33 per litre. In contrast, the export duty on petrol remains unchanged at zero, as stated by the Finance Ministry.

SAED is a variable tax levied on specific products, primarily targeting domestic crude oil and exported petroleum fuels like petrol, diesel, and ATF. Fuel expenses constitute a significant portion of operational costs for Indian airlines, accounting for approximately 35-40% of their total expenditures. In April, the central government had previously increased export duties on petroleum products, raising the charge on high-speed diesel to Rs 55.5 per litre and on ATF to Rs 42 per litre. As of the week ending May 8, global average jet fuel prices surged to $162.89 per barrel, a notable increase from $99.40 at the end of February.