The Delhi government on Saturday lowered the value-added tax on aviation turbine fuel, or ATF, from 25% to 7% for an initial period of six months, in a move it said was meant to support airlines, improve connectivity and keep the capital competitive as an aviation hub.
The decision was cleared at a cabinet meeting chaired by chief minister Rekha Gupta, according to the Chief Minister’s Office.
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The Delhi government's massive 18% VAT cut on Aviation Turbine Fuel isn't just a routine tax adjustment: it is a macroeconomic circuit-breaker. With the Strait of Hormuz blockade sending global crude prices into hyper-volatility, the domestic aviation sector was facing an…
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A fair wind for airline coffers
According to the government’s statement, the tax cut comes against the backdrop of global geopolitical tensions and uncertainty in fuel supplies linked to the conflict in West Asia.
Rekha Gupta described it as a “major economic decision” taken amid “global crisis and rising competition,” while officials said the relief was intended to ease pressure on carriers facing rising fuel costs.
The statement also noted that ATF accounts for nearly 40% of airlines’ operational expenses, making fuel taxation a direct factor in fare levels and carrier profitability.
Delhi govt cuts VAT on aviation turbine fuel from 25% to 7%
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A revenue hit of â‚ą985 crore
The government said the reduced tax rate could result in an estimated revenue loss of about â‚ą985 crore for Delhi.
It also pointed out that Delhi International Airport handled nearly 8 crore passengers in 2024-25, underscoring the city’s position as one of the country’s busiest aviation hubs.
The move is also in step with the Centre’s repeated call for states to rationalise high VAT on ATF to provide relief to airlines and passengers.
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The tax race now has a second starter
Delhi’s decision comes a day after Maharashtra announced a similar reduction in VAT on ATF, cutting the rate from 18% to 7% for six months.
The Delhi government’s move is likely to be watched closely by the aviation industry, which has been under pressure from elevated fuel prices and broader volatility in global energy markets.
