The TN government is considering reducing the VAT rate on aviation turbine fuel

The Tamilaga Vettri Kazhagam (TVK)-led government is considering reducing the nationwide value added tax on aviation turbine fuel (ATF).

Currently, the tax rate is 29%. “We want to reach the level of neighboring states,” says the official. The current rate is expected to be announced when the state budget is presented.

According to information provided 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, the rate of sales tax is 5% along with 1% cess on the tax, besides each of the four airports in the state including Thiruvananthapuram, Nedumbassery, Kannur and Kozhikode charge one percent tax and one percent.

The Tamil Nadu government’s move is in response to the Union government’s persistent demand to reduce the tax rate, which is one of the key factors in determining the operating costs of airlines.

About two months ago, Maharashtra and Delhi reduced the VAT rate on ATF from 18% and 25% to 7% respectively. In the case of Delhi, the reduction should apply for six months initially, while Maharashtra has not set any such timetable.

While the development has been credited with helping the aviation sector, which has been grappling with airspace closures, uncertain operations and a spike in ATF prices following the escalation of tensions in West Asia, the Union government has been urging Tamil Nadu and many others to reduce the tax rate to rationalize taxes.

ATF represents a major aspect of airline operating costs and is in turn determined by several factors such as the VAT rate. The share of jet fuel and diesel expenditure for Indian scheduled operators was around 40% to 45% of total operating costs.

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

In February 2023, his predecessor Jyotiraditya M. Scindia, while attending an event in Chennai, openly called on the state government to reduce the rate as Tamil Nadu was one of the seven states with ATF VAT in the range of 20–30%. A rate cut would put a “tremendous push” on more airlines coming to the region, Mr Scindia said.

Published – 19 Jul 2026 01:03 IST