The Delhi government has announced a significant reduction in Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), slashing the levy from 25% to 7%. This decision, made during a Cabinet meeting chaired by Chief Minister Rekha Gupta on Saturday, May 16, 2026, is expected to provide substantial relief to airlines operating out of the national capital.
Aviation Turbine Fuel constitutes a considerable portion of airline operating costs, typically accounting for 30-40%. Delhi was previously among the states with the highest VAT rates on jet fuel, alongside Tamil Nadu and West Bengal, making it a more expensive hub for airlines.
Easing Financial Pressure on Airlines
Industry experts believe this tax cut will significantly help airlines manage their rising fuel expenses. The reduction comes at a critical time, as global crude oil prices have been on an upward trend, exacerbated by disruptions linked to the West Asia crisis. These factors have considerably increased aviation fuel costs in recent months, putting pressure on airline profitability and contributing to higher airfares.
By lowering the VAT, the Delhi government aims to mitigate some of these external pressures, potentially leading to more stable airfares for passengers flying to and from the city. This move aligns with efforts to support the aviation sector, which plays a crucial role in economic connectivity.
Following Maharashtra's Lead
Delhi's decision follows a similar initiative by the Maharashtra government, which recently reduced its ATF VAT from 18% to 7%. Maharashtra's reduction was implemented for a period of six months, also with the goal of bolstering the aviation sector and curbing the upward trajectory of air ticket prices. Such policy interventions highlight a growing recognition among state governments of the need to support the airline industry in the face of volatile global fuel markets.