T.N. government contemplates reducing VAT rate on aviation turbine fuel

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Published - July 19, 2026 01:03 am IST - CHENNAI

The Tamilaga Vettri Kazhagam (TVK)-led government is contemplating lowering the State-level Value Added Tax on Aviation Turbine Fuel (ATF).

At present, the tax rate is 29%. “We want to make it on a par with that of neighbouring States,” says an official. It is expected that the actual rate will be made public when the State budget is presented.

According to information furnished by the Union Ministry of Petroleum and Natural Gas four months back to the Lok Sabha, Andhra Pradesh charges 1%; Puducherry - 14.5%; Telengana - 16% and Karnataka - 18%. As for Kerala, sales tax rate is 5% along with cess of 1% on tax, besides each of the four airports in the State, including Thiruvananthapuram, Nedumbassery, Kannur and Kozhikode, charges one per cent tax and one per cent cess.

The Tamil Nadu government’s move is in response to the persistent request from the Union government for bringing down the tax rate, which is one of the key factors that determine the operating cost of airlines.

About two months ago, Maharashtra and Delhi lowered the VAT rate on ATF from 18% and 25% to 7%. In the case of Delhi, the reduction would be in force initially for six months while no such timeline had been stipulated by Maharashtra.

Even though the developments have been attributed to provide relief to the aviation sector that had been grappling with airspace closures, uncertain operations and a sharp spike in ATF prices following the escalation of tensions in West Asia, the Union government has been urging Tamil Nadu and many others to bring down the tax rate for the purpose of tax rationalisation.

ATF constitutes a major aspect of airlines’ operating costs and it is, in turn, determined by several factors such as the VAT rate. The share of aircraft fuel and oil expenses of scheduled Indian operators has been around 40% to 45% of the total operating expenses.

In March 2025, Union Minister for Civil Aviation Kinjarapu Rammohan Naidu informed the House that “taking cognisance of the high VAT on ATF levied by States/ Union Territories, the issue was taken up with them. As a result, the VAT on ATF has been reduced by 19 States/ UTs after this Ministry’s request.”

In February 2023, his predecessor, Jyotiraditya M. Scindia, while participating in an event in Chennai, made an open appeal to the State government to decrease the rate as Tamil Nadu was one of the seven States with VAT on ATF in the 20-30% range. Reducing the rate would give “a huge push” to more airlines coming to the region, Mr. Scindia had said.

Published - July 19, 2026 01:03 am IST

state politics / Tamilaga Vettri Kazhagam / aero and aviation sport / diesel fuel / petrol

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