Aviation turbine fuel VAT cut in Delhi to 7% for six months, says CM Rekha Gupta

The Delhi government reduced value-added tax on aviation turbine fuel from 25 per cent to 7 per cent on Saturday, Chief Minister Rekha Gupta said. An official statement from the Chief Minister’s Office said the cut may help airlines and passengers. Gupta said the move could lead to a revenue loss of nearly Rs 985 crore.

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Gupta said the lower rate will apply for six months for now. The decision came as global fuel markets faced uncertainty linked to the ongoing conflict in West Asia. The government said the step was taken in the interest of both the nation and Delhi, as pressure on fuel costs grew.

Delhi VAT on ATF cut and airline costs

Gupta said airlines pay VAT and central excise duty on ATF when buying fuel from oil companies. Gupta said ATF makes up nearly 40 per cent of total airline operating costs. Gupta said higher tax levels affect ticket prices directly. Gupta also said the same pressure can weaken the aviation sector’s finances.

Gupta said recent geopolitical developments have added to these difficulties for carriers. Gupta linked the decision to rising concerns around fuel pricing. The government indicated that reduced taxation could ease cost stress. It also suggested passengers could see some relief if airlines pass on lower input costs.

Delhi VAT on ATF and revenue impact

Gupta said VAT on ATF brings in about Rs 1,368 crore a year. Gupta said this equals nearly 19 per cent of the Delhi government’s total annual VAT collection. Gupta said ATF taxation remains a major revenue stream. The government still chose a temporary cut despite the expected fiscal impact.

Delhi VAT on ATF and GST rules

Gupta said GST has operated nationwide since 2017. Gupta said states still have power to charge VAT on six petroleum products. Gupta said these items sit in the State List under the 7th Schedule. Gupta said ATF stays outside Goods and Services Tax GST for this reason.

Gupta said the Cabinet decision followed Prime Minister Narendra Modi’s focus on improving connectivity and economic activity. Gupta also said the aim included keeping economic competitiveness steady. The government said the revised VAT rate would stay in place for six months initially, alongside monitoring of wider fuel conditions.

With inputs from PTI