Maharashtra govt cuts VAT on aviation fuel

In a move to give a big relief to domestic carriers, the Maharashtra government has announced a reduction in the value added tax levied on aviation turbine fuel (ATF) to 18 per cent from 25 per cent.

The new rate will be applicable in Mumbai, Pune and Raigad districts, deputy chief minister Devendra Fadnavis announced in his budget speech. Maharashtra levies 4 per cent VAT on ATF in districts except Mumbai and Pune.

According to reports, the new rate could help in reducing fuel expenses for airlines as they rework their fueling uplift plans but it is not expected to add to many new flights as both Mumbai and Pune airports are constrained for slots.

Fuel costs account for 30-40 per cent of the airlines' expenses. The issue of reduction in Value-Added Tax (VAT) on ATF was taken up with states/Union Territories levying high VATs on ATF and many of them reduced the tax on aviation fuel in the last many months.

To ensure financial viability in the sector, Union aviation minister, Jyotiraditya Scindia has been asking states to cut VAT on ATF.

"In a scenario of high fuel prices, this step will prove to be a catalyst in our efforts to ramp up air connectivity. With this, Maharashtra joins the league of total 19 States/UTs that have rationalised VAT rates in the last 1.5 years. Alongside enhanced connectivity for Mumbai, Pune & Raigad, this will also make travel more affordable, and boost growth", said Scindia in a tweet.