The Delhi government has reduced the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25% to 7%. The revised tax rate became effective on May 16, 2026, and will remain applicable for an initial period of six months. The decision was announced by the Chief Minister’s Office as part of efforts to support the aviation industry during a period of rising fuel costs and global uncertainty.
Chief Minister Rekha Gupta said the move is intended to lower operational expenses for airlines operating from Delhi. Aviation fuel forms a major portion of airline costs, and reducing VAT is expected to help carriers manage expenses more efficiently. Airlines operating large networks from Delhi may benefit significantly from the lower tax burden.
The Delhi government stated that the decision aligns with the vision of Prime Minister Narendra Modi to improve connectivity, tourism, trade and transportation infrastructure across the country. Officials believe the tax relief could strengthen Delhi’s position as a major aviation and travel hub while encouraging smoother airline operations during volatile market conditions.
Despite the expected benefits for airlines and passengers, the government acknowledged that the tax cut could result in an estimated revenue loss of nearly Rs 985 crore. However, authorities indicated that supporting the aviation and tourism sectors remains a priority due to their contribution to economic activity, employment generation and business growth in the national capital.
The reduction also highlights the ongoing debate around bringing ATF under the Goods and Services Tax (GST) framework. Currently, aviation fuel taxation varies widely between states, ranging from around 4% to as high as 30%. Industry experts have repeatedly argued that including ATF under GST would create a more uniform tax structure and reduce cost volatility for airlines.
The decision by Delhi follows similar measures announced by other states such as Maharashtra, which recently reduced VAT on aviation fuel as well. These steps come at a time when airlines are facing pressure from higher global crude oil prices, geopolitical tensions in West Asia and rising operational expenses. The aviation sector hopes that such tax reductions will help stabilize airfares and support long-term industry growth.