TN govt slashes aviation fuel VAT to 1% at airports outside Chennai

CHENNAI: The Tamil Nadu government has cut value-added tax (VAT) on aviation turbine fuel (ATF) for scheduled airlines from 29% to 1% at airports outside Chennai, while reducing the rate at Chennai airport to 16%, providing tax relief to carriers grappling with soaring fuel costs.

The reductions were notified by the Commercial Taxes and Registration Department through three notifications issued on October 23 under the Tamil Nadu Value Added Tax Act, 2006. The revised rates will take effect from November 1, 2026, and remain in force until October 31, 2027.

Under the first notification, the VAT on ATF supplied to scheduled airlines refuelling at Chennai airport has been reduced from 29% to 16%. The second notification lowers the rate from 29% to 1% at other airports in the State. A third notification reduces the tax on ATF supplied to scheduled aircraft with a maximum take-off mass below 40,000 kg at airports outside Chennai from 5% to 1%.

Oil companies must submit declarations signed by purchasing airlines along with their monthly returns to the jurisdictional assessing officer. The declarations must identify the domestic flight for which the fuel was purchased.

The decision comes amid mounting pressure on governments to ease the aviation sector’s cost burden. In September, the Federation of Indian Airlines sought lower ATF taxes in Tamil Nadu and other States, citing a surge in fuel expenses, airspace restrictions and additional operating costs. It warned that airlines could withdraw from financially unsustainable routes without timely relief.

ATF, which accounts for a substantial share of airline operating expenditure, has become a key concern amid volatility in global fuel prices. The Centre has also introduced a price-stabilisation support mechanism for scheduled Indian airlines in response to the West Asia crisi

The decision comes amid mounting pressure on governments to ease the aviation sector’s cost burden. In September, the Federation of Indian Airlines sought lower ATF taxes in Tamil Nadu and other States, citing a surge in fuel expenses, airspace restrictions and additional operating costs. It warned that airlines could withdraw from financially unsustainable routes without timely relief.

ATF, which accounts for a substantial share of airline operating expenditure, has become a key concern amid volatility in global fuel prices. The Centre has also introduced a price-stabilisation support mechanism for scheduled Indian airlines in response to the West Asia crisis.