Tamil Nadu cuts VAT rate on aviation turbine fuel at Chennai airport from 29% to 16%

In a significant and long-expected decision, the Tamil Nadu government has reduced the value added tax (VAT) rate on aviation turbine fuel (ATF) from 29% to 16% for scheduled airlines fuelling at the Chennai airport.

The revised rate will remain in force from November 1, 2026, to October 31, 2027, according to a notification published in the Tamil Nadu Government Gazette.

The State has also reduced the VAT on ATF for scheduled airlines fuelling at airports in Tamil Nadu other than Chennai from 29% to 1%. The VAT has been reduced from 5% to 1%. for scheduled airlines operating aircraft with a maximum take-off mass of less than 40,000 kg and fuelling at airports in the State other than Chennai.

Significant share

The reduction in the VAT rate partially fulfils the long-standing demand of the Union government and the aviation sector. ATF accounts for a significant share of the airlines’ operating cost, with VAT being one of the major factors determining it.

Airlines had long requested the State to decrease the VAT rate on ATF. Now that the rate has been reduced, the onus is on the airlines to improve connectivity and add new flights from Chennai and Tamil Nadu for the benefit of passengers, sources said.

A few months ago, Maharashtra and Delhi had lowered the VAT rate on ATF.