Why ATF is now much cheaper in Delhi
What's the story
In a major move, the Delhi government has slashed the value added tax (VAT) on aviation turbine fuel (ATF) from 25% to just 7%. The concessional rate will be applicable for six months at first. Chief Minister Rekha Gupta said that the decision was taken in light of recent global geopolitical developments and financial pressure on the aviation sector.
Financial implications
Decision could lead to revenue loss of ₹985cr
The VAT on ATF contributes an estimated annual revenue of ₹1,368 crore, nearly 19% of Delhi's total annual VAT collection. The Chief Minister said that the decision could lead to a revenue loss of nearly ₹985 crore for the government. However, she emphasized that this move would help maintain economic competitiveness and offer relief to the aviation sector while boosting tourism and logistics activities.
Tax structure
Why is ATF outside GST?
Despite the implementation of the Goods and Services Tax (GST) since 2017, states still have the power to levy VAT on six petroleum products under the State List of the Constitution. This includes ATF, which is why it remains outside the GST framework. Gupta said airlines currently pay VAT and central excise duty on ATF while purchasing fuel from oil companies.
Cost impact
Gupta emphasizes need for support
Gupta added that ATF accounts for almost 40% of airline operating costs. Higher tax rates directly impact the ticket prices and the financial condition of airlines. The Chief Minister said the Delhi government will continue efforts to support aviation, tourism, trade, logistics and investment. She also noted that Indira Gandhi International Airport handled nearly eight crore passengers during 2024-25, making it India's largest aviation hub.