Rekha Gupta govt's big decision: Delhi cuts aviation fuel VAT to 7% from 25%

The Rekha Gupta government on Saturday, May 16, announced a major relief measure for the aviation sector by reducing Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) to 7 per cent from the existing 25 per cent. The decision was taken during a Delhi Cabinet meeting chaired by Chief Minister Rekha Gupta.

According to an official statement issued by the Delhi government, the move is expected to benefit both airlines and passengers at a time when global fuel prices remain volatile due to tensions in West Asia.

“Delhi government has decided to reduce the value-added tax (VAT) on aviation turbine fuel (ATF) from the existing 25 per cent to 7 per cent, a move which is likely to benefit the airlines and common passengers,” the statement said.

Why did Delhi government reduce VAT on ATF

The Delhi government said the decision comes amid uncertainty in global fuel markets triggered by the ongoing conflict in West Asia. Rising fuel costs have increased operational expenses for airlines in recent months.

ATF is one of the biggest cost components for airlines and accounts for nearly 30–40 per cent of operating expenses. Higher fuel prices have also pushed up airfares on several domestic and international routes.

By reducing VAT on jet fuel, the Delhi government aims to ease financial pressure on airlines and improve operational viability for carriers operating from the national capital.

How will passengers and airlines benefit

Industry experts believe the reduction in VAT could help airlines lower operational costs and improve margins. The move may also help stabilise ticket prices during the peak travel season if airlines pass on some of the benefits to passengers.

The tax cut is also expected to strengthen Delhi’s position as a major aviation hub by making fuel prices more competitive compared to other states.

Earlier, the Maharashtra government had also reduced VAT on ATF to 7 per cent from 18 per cent for six months to provide relief to airlines facing rising fuel expenses.

The Centre has been urging states to reduce taxes on aviation fuel, which remains one of the most heavily taxed inputs in the aviation sector. Recently, the Union government also reduced export duties on ATF amid concerns over rising fuel costs linked to geopolitical tensions and supply disruptions.

What is Aviation Turbine Fuel

Aviation Turbine Fuel, commonly known as ATF, is the specialised fuel used to power aircraft. Since fuel expenses form a large share of airline operating costs, changes in ATF prices and taxes directly affect airline finances and air ticket prices.

With Delhi now joining other states in lowering VAT on aviation fuel, airlines are expected to get significant cost relief in the coming months.