Tata Group owned Air India has thanked Tamil Nadu Chief Minister Vijay for slashing Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 29 per cent to 16, as it will help reduce operating costs for airlines and improve air connectivity within the state. In a post on X, the airline welcomed the decision to reduce VAT at Chennai Airport and to just 1 per cent at other airports in Tamil Nadu.
"Air India expresses its sincere gratitude to the Hon'ble Chief Minister of Tamil Nadu, @TVKVijayHQ and the Government of Tamil Nadu for reducing VAT on Aviation Turbine Fuel (ATF). The reduction from 29% to 16% at Chennai Airport and to 1% at other airports in the State is a welcome step that will help lower operating costs and improve air connectivity," the airline said in the post
"We look forward to strengthening our network and serving the people of Tamil Nadu better," the airline added.
The Tamil Nadu government announced the tax reduction on Friday, October 23, offering significant relief to airlines that have long raised concerns over the state's high aviation fuel taxes.
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Until now, Tamil Nadu's 29 percent VAT on ATF was among the highest in the country, making refuelling at Chennai considerably expensive compared to airports in neighbouring states. Airlines were consequently discouraged from refuelling extensively at the airport.
According to a notification issued by the state's Commercial Taxes and Registration Department, the Governor has approved the revised tax rates for aviation fuel supplied to scheduled airlines.
Under the new structure, airlines refuelling at Chennai Airport will pay 16 per cent VAT, while those operating from other airports, including Coimbatore, Madurai and Tiruchirappalli, will benefit from a substantially lower rate of 1 per cent.
The revised rates will come into effect on November 1, and remain applicable until October 31, 2027. The notification requires fuel dealers to submit declarations signed by the purchasing airlines along with their monthly tax returns to assessing authorities.
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The decision brings Tamil Nadu at par with other southern states that have already reduced taxes on aviation fuel. Kerala currently charges 1 per cent VAT on ATF, while Andhra Pradesh and Telangana have rationalised their rates to 1 per cent.
The lower tax burden could make airports outside Chennai more attractive to carriers looking to expand regional operations. Aviation fuel accounts for a substantial share of an airline's operating expenses, and reducing taxes on ATF provides carriers greater flexibility to introduce new routes, increase flight frequencies and improve connections between smaller towns.
Passengers could also benefit if airlines pass on some of the savings through lower ticket prices on regional routes. However, any reduction in airfares will depend on individual airlines' pricing decisions and operating costs.
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