Maharashtra slashes jet fuel tax to 18% in boost for aviation

New Delhi: In a respite for airlines, the state government of Maharashtra has reduced the value added tax (VAT) on aviation turbine fuel (ATF) to 18%, a reduction of 28% from the current level of 25%. This was announced by Maharashtra deputy chief minister Devendra Fadnavis, while presenting the state budget on Thursday.

“With this, Maharashtra has joined the league of total 19 States/Union territories that have rationalized VAT rates in the last 1.5 years. Alongside enhanced connectivity for Mumbai, Pune and Raigad, this will also make travel more affordable, and boost growth,” Union civil aviation minister Jyotiraditya Scindia said.

In a scenario of high fuel prices, this step will prove to be a catalyst to ramp up air connectivity, he added.

The aviation industry has been requesting the Indian government to bring aviation turbine fuel under the goods and services tax regime for several years but it has not yielded any result. However, Scindia has been attempting to bring some respite for the industry via direct dialogue with the state governments to reduce VAT on ATF.

Fuel prices are a major cost component for Indian airlines as they account for 35-40% of an airline’s expenditure as against global average of nearly 30%.

The reduction in VAT on jet fuel in Maharashtra is a significant step as Mumbai is the second largest hub for airlines in India.

Mumbai handled over 14% international and domestic passenger traffic in India in January, as per the data available from the Airports Authority of India.

Delhi has the largest airport in the country and the combined market share of Delhi and Mumbai is more than 30% in the domestic segment.

So far, Andaman & Nicobar Islands, Uttarakhand, Jammu & Kashmir, Ladakh, Tripura, Madhya Pradesh, Himachal Pradesh, Uttar Pradesh, Arunachal Pradesh, Haryana, Dadra and Nagar Haveli and Daman and Diu, Manipur, Jharkhand, Mizoram have reduced the VAT on ATF to 1-4%.

Gujarat has decreased the rate to 5% from 30%, Goa has brought it down to 8% from 18%, and Karnataka has reduced it to 18% from 28% earlier.