Maharashtra cuts VAT on aviation fuel in efforts to ramp up air connectivity; Centre hails move

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

Deputy Chief Minister and Finance Minister Devendra Fadnavis while presenting the state Budget on Thursday said that the new rate will be applicable in Mumbai, Pune and Raigad districts.

Notably, Mumbai is the country's second busiest airport with 315 domestic departures daily. Pune ranks among the top ten busiest domestic airports. 

Raigad doesn’t have a functional airport but the upcoming Navi Mumbai airport is in the district.

Meanwhile, Union Civil Aviation Minister Jyotiraditya Scindia has hailed Maharashtra government's step to cut VAT. He said that in a scenario of high fuel prices, this step will prove to be a catalyst in efforts to ramp up air connectivity.

Indian carriers have time and again raised the issue of high operating costs primarily due to steep ATF prices.

"I thank Maharashtra CM @mieknathshinde Ji & Depy CM @Dev_Fadnavis Ji for taking the progressive decision to reduce VAT on Air Turbine Fuel from 25% to 18%. In a scenario of high fuel prices, this step will prove to be a catalyst in our efforts to ramp up air connectivity," the Civil Aviation Minister said in a series of tweets.

"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," he added.

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.

Fuel costs account for 30-40 per cent of the airlines' expenses.

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