In a relief to the aviation sector, the Maharashtra government has extended the concessional VAT rate of 7 percent on aviation turbine fuel (ATF) i.e. jet fuel till April 14 next year. This decision will help the airlines to keep the cost of fuel low. Apart from this, the airlines operating from the airports of Maharashtra are also expected to get relief.
What was the tax rule earlier?
The Maharashtra government had decided to reduce VAT on aviation turbine fuel on 14 May 2026. Under this, ATF was levied at 7 per cent instead of 18 per cent from May 15, 2026 to November 14, 2026. The relief was to expire on November 14. But now the finance department has issued a new notification on November 12 and extended its period by another five months. This means that airlines will continue to benefit from lower VAT till 14 April 2027.
Why is this decision important for airlines?
Jet fuel is the biggest expense for airlines. Sometimes the cost of fuel reaches 40-50% of the total operating cost of an airline. In such a situation, reducing the tax on ATF provides relief to the costs of the companies. Especially when crude oil prices are fluctuating in the international market and airlines are facing long routes or other operating costs. Lower VAT could help airlines buying jet fuel in Maharashtra control costs and plan their business better.
Will passengers also get cheaper air tickets?
The benefit of this decision is certainly likely to trickle down to common passengers, but it does not mean that air tickets will immediately become cheaper. In fact, airline companies take several things into account while pricing tickets. These include fuel costs, air fares, airport charges, personnel costs and passenger demand on the route. If the reduction in fuel tax reduces the cost of airlines, there may be less pressure on ticket prices in the future. However, whether the tickets will be cheaper or not will depend on the companies’ business strategy and market conditions.
What does the government’s decision mean?
This decision of the Maharashtra government is going to give stability to the aviation sector on the tax front. Along with this, airlines will continue to benefit from lower VAT on fuel for at least the next five months. Notably, the government has not made any new reduction in VAT, but has extended the already applicable concessional rate of 7%. This will benefit airlines purchasing duty-paid ATF in Maharashtra. Overall, this decision by the Maharashtra government will provide relief to airlines on the fuel cost front. Now it remains to be seen how much this relief will be benefited by the airlines to their passengers.
