Delhi Government Poised to Reduce VAT on Aviation Fuel, Following Maharashtra's Lead

Potential VAT Reduction on Aviation Turbine Fuel

Following Maharashtra's recent decision, the Delhi government is expected to lower the value added tax (VAT) on aviation turbine fuel (ATF), providing significant relief to the aviation sector, according to reliable sources. Discussions are ongoing, and the VAT is anticipated to be adjusted to match Maharashtra's new rate of 7%, down from the current 18%. This adjustment comes at a critical juncture as Indian airlines struggle with soaring jet fuel prices exacerbated by the ongoing conflict in West Asia.

The Maharashtra government has already implemented a VAT reduction on ATF to 7%, effective until November 14. Reports indicate that the central government is actively engaging with four states—Delhi, Tamil Nadu, West Bengal, and Maharashtra—known for imposing the highest VAT on jet fuel. The Ministry of Civil Aviation has been advocating for these reductions.

In addition, the central government has recently lowered export duties on diesel and ATF. On Friday, it was announced that the special additional excise duty on ATF exports would decrease from Rs 33 per litre to Rs 16 per litre. The Finance Ministry also revised the export duty on diesel from Rs 55.5 per litre to Rs 23 per litre, while the duty on petrol remains unchanged.

As the crisis in West Asia continues, the Indian aviation industry faces challenges such as airspace closures, operational uncertainties, and rising ATF prices. The government initially introduced export duties on diesel and ATF on March 26, setting rates at Rs 21.5 and Rs 29.5 per litre, respectively, before increasing them on April 11 and subsequently easing them during a review on April 30.