Maharashtra cuts VAT on aviation fuel to 7% till November amid rise in airfares

Maharashtra cuts VAT on aviation fuel from 18% to 7% for six months, aiming to ease airfares amid rising oil prices, with a revenue loss of ₹600 crore.

MUMBAI: Responding to Prime Minister Narendra Modi’s appeal to reduce taxes on aviation fuel amid rising global crude oil prices and the ongoing West Asia crisis, the Maharashtra government has slashed Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 18% to 7% for six months. Officials said the move is expected to result in an annual revenue loss of around ₹550 crore to ₹600 crore to the state exchequer.

Maharashtra cuts VAT on aviation fuel to 7% till November amid rise in airfares

The state government issued the notification on May 14, with the revised tax structure coming into effect from Friday and remaining in force till November 14, 2026.

At present, Maharashtra levies 18% VAT on ATF at Mumbai, Navi Mumbai and Pune airports. The tax is 1% at six airports covered under the Centre’s UDAN regional connectivity scheme and 5% at other smaller airports in the state. The revised 7% VAT will apply to domestic flight operations, while international aircraft continue to remain exempt from VAT on fuel.

The decision comes amid concerns over rising airfares triggered by volatile crude oil prices, airspace disruptions and operational uncertainties linked to the West Asia conflict. ATF is one of the biggest operational costs for airlines.

The Centre had urged states with the highest VAT rates on ATF to reduce taxes to provide relief to airlines and passengers. Tamil Nadu currently levies the highest VAT at 29%, followed by West Bengal at 25%, Delhi at 20% and Maharashtra at 18%.

A senior finance department official said the Centre had requested states to reduce VAT to 1% to 4% for six months. “Considering the state’s financial situation, Maharashtra decided to reduce VAT by 11 percentage points instead. The decision was taken after reviewing the situation over the past few weeks,” the official said.

Officials also pointed out that neighbouring states such as Gujarat and Goa had already reduced VAT on ATF to 5% and 8%, respectively, making them more competitive for airline fuel purchases. Maharashtra had earlier reduced VAT on ATF from 25% to 18% in March 2023 after several states, including Uttar Pradesh, Andhra Pradesh, Bihar, Himachal Pradesh and Madhya Pradesh, cut taxes to attract aviation business.

Union Aviation Minister Ram Mohan Naidu welcomed the move and said Maharashtra, which has 16 operational airports and annual passenger traffic of around 75 million, would benefit significantly from the tax reduction. He said the decision would help airlines manage costs and keep airfares in check despite global challenges.

Union Commerce and Industry Minister Piyush Goyal also thanked chief minister Devendra Fadnavis for the decision, saying it would help reduce air freight charges, support exporters and boost tourism.