The Tamil Nadu government on Friday announced a reduction of VAT on Aviation turbine fuel to 16 per cent from the present 29 per cent for scheduled airlines fueling at Chennai airport, and to one per cent for scheduled airlines fueling at other airports across the state.
The significant move aligns the state closer to the southern neighbours, resolving a long-standing grievance of the aviation industry. Previously Tamil Nadu's 29 percent Value Added Tax was among the highest in the country, leading airlines to limit their refuelling operations in Chennai.
As per a notification published in the government gazette on Friday, the Commercial Taxes and Registration Department said the Governor consented to a reduction in the rate of tax payable by an oil company on the sale of Aviation Turbine Fuel, including jet fuel to aircraft of scheduled airlines fueling at Chennai airport from 29 per cent to 16 per cent.
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The dealer shall furnish a declaration duly filled in and signed by the purchaser, along with the monthly return, to the assessing officer concerned in the prescribed form.
The changes apply from the midnight of October 31 / November 1, 2026, to the midnight of October 30 /31, 2027, the notification said.
By cutting down the rate to 16 per cent in Chennai and 1 per cent in all other airports like Madurai, Tiruchirappalli and Coimbatore, the state becomes highly competitive.
Kerala levies a flat 1 per cent VAT on ATF while both Andhra Pradesh and Telangana have rationalised their rates down to 1 per cent, a source said.
The rate reduction could usher in changes for passengers, making regional tickets cheaper, and would also see airlines expand their fleet schedules, add more direct flights, and establish Chennai as a prominent regional refuelling hub.
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