Vijay govt slashes aviation fuel VAT to 16 pc, Centre welcomes move

Tamil Nadu Chief Minister C Joseph Vijay has received appreciation from the Centre after the Tamilaga Vettri Kazhagam (TVK) government slashed value-added tax (VAT) on aviation turbine fuel (ATF), a move aimed at easing airlines’ operating costs and improving regional air connectivity.

Civil Aviation Minister K Ram Mohan Naidu welcomed the decision, calling it a “welcome step for the aviation sector” and stressing that cooperation between the Centre and states was essential to making air travel more affordable.

Also read: Air India, IndiGo, SpiceJet approach Centre, seek duty cut on ATF

In an X post, Naidu hailed the government’s move. “Appreciate the Tamil Nadu government's decision to reduce VAT on Aviation Turbine Fuel (ATF), a welcome step for the aviation sector. Thank you, Chief Minister Vijay, for this initiative,” he said. “Making air travel more affordable requires the Centre and States to work together. Our shared priority must always be the passengers,” he added.

The TVK government announced the tax cuts on Friday (October 23) through three gazette notifications. The move comes at a time when airlines are grappling with rising fuel costs and mounting pressure on their operating margins.

Tamil Nadu govt’s decision

The state has reduced VAT on ATF sold at Chennai airport from 29 per cent to 16 per cent. At other airports across Tamil Nadu, the rate has been cut from 29 per cent to 1 per cent.

A separate concession reduces VAT on fuel for smaller aircraft with a maximum take-off mass below 40,000 kg at airports outside Chennai from 5 per cent to 1 per cent. The notifications will remain in force until October 31, 2027.

Also read: Delhi, Mumbai slash VAT on ATF to 7 per cent as airlines face rising fuel costs

Announcing the decision, Tamil Nadu Industries Minister S Keerthana described it as a “decisive step” towards making air travel more accessible and regional airports more competitive. “Lower operating costs can encourage airlines to introduce new routes, increase flight frequencies and expand operations beyond Chennai. We are building an aviation ecosystem that connects more regions, unlocks economic potential and powers Tamil Nadu's next phase of growth,” she said in a post on X.

Why the tax cut matters

The ATF price burden has risen amid surging crude oil and jet fuel prices, adding to the financial pressure on carriers.

The strain has been compounded by the US-Iran conflict, which has disrupted aviation operations and contributed to higher fuel costs. Indian airlines also face the impact of a weakening rupee, as several major expenses, including aircraft lease rentals and maintenance, are denominated in dollars.

Against this backdrop, Tamil Nadu’s decision could provide some relief by lowering the tax component of fuel costs, particularly for airlines operating from airports outside Chennai.