Maharashtra Government Cuts VAT on ATF to 7% from 18% Amid High Jet Fuel Prices

As per news reports, the Maharashtra Government has reduced Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) to 7% from 18%, according to a government order. The revised tax rate will remain applicable until 14 November. 

The decision comes amid higher fuel prices globally following the conflict in West Asia. Aviation fuel is among the largest cost components for airlines, accounting for nearly 35-40% of operating expenditure. 

Mumbai Airport Among Key Beneficiaries 

The lower VAT rate is expected to reduce refuelling costs for airlines operating from airports in Maharashtra. Mumbai airport, the country’s second busiest after Delhi, handles around 15% of India’s air traffic. 

Airports in Pune and Nagpur are also expected to see lower fuel-related operating costs for carriers. 

With the revision, Maharashtra’s VAT on ATF is now below Delhi’s rate of 25%, making Mumbai comparatively cheaper for airline refuelling operations. 

Civil Aviation Ministry Had Sought Lower Taxes 

The Ministry of Civil Aviation had earlier asked several states, including Maharashtra, Delhi, Tamil Nadu and West Bengal, to review high VAT rates on jet fuel. 

Airlines have repeatedly raised concerns over the structure of ATF taxation in India. Since VAT is charged as a percentage of fuel prices, the tax burden rises along with increases in crude oil prices. 

Carriers have also sought the inclusion of ATF under the Goods and Services Tax (GST) regime, which would allow them to claim input tax credit on fuel purchases. 

Jet Fuel Prices Continue to Rise 

Industry data showed global average jet fuel prices at $162.89 per barrel for the week ended 8 May, compared with $99.40 per barrel at the end of February. 

The increase in fuel prices has started affecting airline operations. Tata-owned Air India recently announced a temporary reduction in some international services for three months beginning June due to higher operating costs linked to fuel prices. 

The airline also stated that additional reductions may be considered if fuel prices remain elevated. 

Read More: Government Exploring PLI Scheme for Seafood Sector MSMEs: Commerce Ministry! 

Conclusion 

The reduction in VAT is expected to provide some relief to airlines operating from Maharashtra airports as carriers continue to face pressure from higher fuel costs and volatile global oil prices 

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