Tax relief on ATF: Maharashtra extends 7% VAT on jet fuel until April 2027, what it means for airlines

Airlines operating in Maharashtra will continue to get relief on jet fuel costs after the state government extended the reduced 7% value-added tax (VAT) on aviation turbine fuel (ATF) until April 14, 2027. The decision gives airlines another six months of lower fuel taxes, offering some breathing room at a time when rising fuel prices and longer flight routes are putting pressure on their finances.

The Maharashtra Finance Department announced the extension in a notification issued on November 12. The earlier concession was due to expire on November 14, 2026.

The reduced tax rate, first introduced in May this year, was brought down from 18% to 7% on duty-paid ATF. The latest decision keeps the existing rate unchanged rather than introducing a fresh tax cut.

The Federation of Indian Airlines (FIA), which represents IndiGo, Air India and SpiceJet, had urged the Maharashtra and Delhi governments to retain the lower VAT rates.

Airlines have argued that cheaper fuel taxes can help bring down operating costs while also encouraging carriers to buy more fuel within these states.

In an October letter to Delhi Chief Minister Rekha Gupta, the federation said the reduction in VAT had led to a 40% increase in aviation fuel purchases in Delhi. It argued that keeping the lower rate would support fuel sales and help maintain tax collections for the government.

Why cheaper jet fuel matters for airlines

Fuel costs have become a growing concern for Indian airlines. According to the FIA, fuel now accounts for around 50-55% of their operating expenses, compared with the usual 30-40%.

The pressure has increased amid the ongoing West Asia crisis. Airspace restrictions have forced airlines to take longer routes on several international journeys, increasing fuel consumption and crew expenses.

Airlines are also dealing with reduced aircraft utilisation because of longer flying times. The depreciation of the rupee has added to their expenses, making foreign currency payments for aircraft leases, maintenance and insurance more expensive.

Higher jet fuel prices have also pushed airlines to introduce fuel surcharges and increase ticket prices, adding to the cost of air travel for passengers.

Delhi had also reduced VAT on aviation turbine fuel from 25% to 7% earlier this year. That concession was initially introduced for a limited period and was due for review in November.

The FIA has asked the Delhi government to extend the reduced rate beyond November 16. Industry sources have indicated that a similar extension could be announced by Delhi soon.

For airlines, continuing the lower VAT rates in both major aviation markets would help provide greater certainty over fuel expenses in the coming months.