New Delhi: The Delhi government on Friday approved a major tax cut, reducing Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25% to 7%, a move expected to lower operational costs for airlines operating from the national capital and potentially make air travel cheaper in the coming months.
Chief Minister Rekha Gupta said the revised VAT rate will remain applicable for an initial period of six months. She noted that ATF accounts for nearly 40% of airline operating costs, and high fuel taxes directly influence ticket prices and airline profitability.
The decision comes amid rising operational pressures on carriers due to volatile crude oil prices and global geopolitical tensions.
Even after the introduction of GST in 2017, ATF remains outside its ambit, allowing states to levy their own taxes. Delhi previously had one of the highest VAT rates on aviation fuel. With the reduction, airlines are expected to benefit from lower fuel costs, although immediate fare cuts have not been announced.
Airfares also depend on demand, competition, seasonal trends, and global oil prices, analysts said.
The government said the move aims to strengthen Delhi’s position as a major aviation hub. Around 8 crore passengers travelled through Indira Gandhi International Airport in 2024–25, making it the country’s busiest airport.
Officials estimate the tax cut may cause a revenue loss of about ₹985 crore but will support aviation, tourism, logistics, and trade competitiveness.
