Flights From Delhi May Get Cheaper As Tax On Aviation Fuel Slashed

Flying from Delhi could become slightly cheaper in the coming months as the national capital's government has slashed the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25 per cent to 7 per cent.

The decision, approved by the Delhi Cabinet on Friday, is expected to reduce fuel costs for airlines operating out of the national capital. The revised VAT rate will remain in place for six months initially, Chief Minister Rekha Gupta said.

The move comes at a time when airlines are facing rising operational costs amid global geopolitical tensions and volatile crude oil prices.

"ATF accounts for nearly 40 per cent of the total operational cost of airlines. High tax rates directly impact ticket prices and the financial health of the aviation sector," Gupta said.

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Why The Tax Cut Matters

Aviation Turbine Fuel is one of the biggest expenses for airlines, and state-level taxes play a major role in determining fuel costs.

Even after the rollout of the Goods and Services Tax (GST) in 2017, ATF continues to remain outside the GST framework, allowing states to levy VAT separately. Delhi earlier imposed one of the highest VAT rates on aviation fuel in the country.

With the tax now reduced to 7 per cent, airlines could see lower operating costs on flights originating from Delhi. While there has been no immediate announcement on airfare reductions, aviation analysts say lower fuel taxes can ease pricing pressure on carriers over time.

Airfares, however, also depend on passenger demand, competition, seasonal travel trends and international crude oil prices.

Several states have lowered ATF taxes in recent years as airlines increasingly factor fuel taxation into route planning and operational costs.

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Delhi Eyes Bigger Aviation Hub Role

The Delhi government said the decision was also aimed at strengthening the capital's position as a major aviation and connectivity hub.

According to the government, nearly 8 crore passengers travelled through Indira Gandhi International Airport during 2024-25, making it the country's busiest airport.

The government estimates the VAT reduction could lead to a revenue impact of around Rs 985 crore.

Officials said the lower tax rate is intended to support aviation, tourism, logistics and trade activities while helping Delhi stay competitive with other states that have reduced ATF taxes to attract airline traffic.