Tamil Nadu has issued an order cutting value-added tax (VAT) on aviation turbine fuel (ATF), a move aimed at lowering operating costs for airlines and improving air connectivity within the state.
Until now, ATF VAT in Tamil Nadu stood at 29%, which the report notes is higher compared with several other states. With fuel accounting for up to about half of an airline’s operating costs, the higher tax burden was cited as a factor pushing up ticket prices and discouraging new services to Tamil Nadu cities.
Under the revised rates, ATF supplied to aircraft refuelling in Chennai will be taxed at 16%, down from 29%. For aircraft refuelling at other airports in the state—including Coimbatore and Madurai—the VAT has been reduced from 29% to 1%.
The order also provides a separate concession for smaller aircraft weighing under 40,000 kg: at airports outside Chennai, the applicable tax for refuelling has been reduced from 5% to 1%. The revised rates will take effect from November 1 and remain in force until October 31, 2027.
As part of compliance, oil companies have been instructed to obtain a monthly declaration from airlines containing flight-related details and submit it along with the monthly tax return to the assessing officer. A minister described the decision as a “historic milestone,” saying the cut could encourage new routes and expanded services, potentially helping reduce fares and increase air traffic in Tamil Nadu.
