By Admin 
- VAT cut on ATF in Delhi-Mumbai, big relief to airlines.
- Global tensions, rupee weakness increase airlines’ costs.
- Amid increasing demand, reduction in ATF tax provided some hope.
- Revenue loss to states, demand to bring ATF in GST intensifies.
ATF Tax Relief: India’s two largest aviation hubs Delhi and Mumbai have made a major reduction in VAT on Aviation Turbine Fuel i.e. ATF. This decision is expected to provide relief to airlines from rising costs, especially at a time when global fuel prices, weak rupee and operational expenses are rising rapidly.
How much tax reduced in Delhi and Mumbai?
If we talk about tax, Delhi has reduced VAT on ATF from 25 percent to 7 percent. This relief has been implemented for six months. Whereas Maharashtra has reduced VAT on ATF for domestic flights in Mumbai from 18 percent to 7 percent. This decision has come at a time when airlines were struggling with rising fuel prices and had warned the government about increasing costs.
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Fuel crisis increases the difficulties of airlines
The aviation sector is currently facing a huge fuel crisis. The Federation of Indian Airlines (FIA), which includes companies like Air India, Indigo and SpiceJet, had warned the government that many routes were becoming economically unprofitable due to rising fuel costs. According to FIA, earlier fuel cost used to be about 30 to 40 percent of the total expenses of airlines, but now it has increased to 55 to 60 percent.
impact of global stress
The impact of ongoing tensions in the Middle East and supply disruptions around the Strait of Hormuz was also visible on jet fuel prices. A large part of the oil and LNG supply around the world passes through this route. While at the end of February 2026, the price of jet fuel was around $99 per barrel, by May 2026 it increased to around $263 per barrel.
Why are Delhi and Mumbai so important?
According to figures disclosed by Chief Minister Rekha Gupta, Delhi’s Indira Gandhi International Airport handled around 8 crore passengers in 2024-25, while Mumbai Airport handled 5.55 crore passengers in 2025 and recorded a movement of more than 3,31,000 aircraft. Most of the domestic and international flights in the country operate from these two cities. This is the reason why the effect of reduction in tax on fuel will be visible on the entire aviation sector.
Increasing consumption of ATF
The demand for ATF is continuously increasing in India. According to government data, about 764 thousand metric tons of ATF was consumed in the country in February 2026. Whereas in 2025, domestic airlines will carry about 167 million passengers. Amidst such huge demand, even a little relief in fuel prices can prove to be a big saving for airlines.
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Increasing financial pressure on airlines
Airlines are already facing many financial challenges. Increasing lease rentals, shortage of aircraft, technical problems in engines, maintenance expenses and weakness of rupee against the dollar have increased the problems of the companies. Its effect is also visible on the performance of companies. Air India has stopped some international flights like Chicago, Newark and Shanghai, while the number of flights on many routes has been reduced. On the other hand, IndiGo’s net profit fell by about 77.6 percent in the third quarter of FY 2026.
There may be a reduction in fuel tankering
The reduction in ATF tax may also impact the fuel strategy of airlines. Till now many airlines adopted fuel tankering strategy. That is, she used to get more fuel filled at low tax airports so that she does not have to take fuel again at expensive airports. However, this increased the weight of the aircraft and affected the fuel efficiency. Experts believe that due to lower taxes in Delhi and Mumbai, the need for such strategies will reduce.
Will air tickets be cheaper?
There is less possibility of passengers getting cheap tickets immediately after the tax cut. Fares in Aviation Sector: Fares in the sector are not determined only by cost, but demand and supply also play a big role in it. At present, passenger demand remains strong, while flight capacity is limited due to shortage of aircraft and technical problems. In such a situation, airlines will first try to reduce their financial pressure.
States will suffer revenue loss
This decision will also cause loss of revenue to the state governments. Delhi government estimates that it may suffer a loss of around Rs 985 crore due to VAT cut. Maharashtra is expected to suffer a revenue loss of Rs 550 to 600 crore annually. After this, both the governments believe that this step will help in maintaining their cities as strong aviation hubs.
Demand to bring ATF in GST intensifies
Amidst this entire issue, the old demand of the aviation industry has once again intensified that ATF should be brought under the ambit of GST. At present, different VAT is applicable on ATF in different states and airlines are not able to avail the benefit of input tax credit. The industry believes that if ATF is included in GST, fuel costs can be stabilized across the country.