Centre praises Tamil Nadu CM Vijay’s Aviation Fuel Tax cut: ‘Thank you, Thiru’

Tamil Nadu has reduced VAT on ATF at Chennai airport to 16% from 29%, while the rate has been cut to 1% at all other airports in the state.

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Tamil Nadu chief minister C Joseph Vijay’s decision to cut taxes on aviation turbine fuel (ATF) has won praise from the Centre. Union civil aviation minister Ram Mohan Naidu on Friday welcomed the move and said Centre-state cooperation was key to making air travel more affordable.

Under the revised tax structure, Tamil Nadu has reduced the Value-Added Tax (VAT) on ATF at Chennai airport to 16% from 29%, while the rate has been cut to 1% at all other airports in the state. Naidu thanked Vijay for the initiative and described the reduction as a positive step for the aviation sector.

“Appreciate the Tamil Nadu Government’s decision to reduce VAT on Aviation Turbine Fuel (ATF), a welcome step for the aviation sector," the Union minister said on X. "Thank you to Hon’ble Chief Minister Thiru for this initiative. Making air travel more affordable requires the Centre and States to work together. Our shared priority must always be the passengers.”

Goa’s ATF VAT cut also welcomed

This comes shortly after the Goa government reduced VAT on aviation turbine fuel to 7%, news agency PTI reported. The revised rate took effect from October 24, following a notification amending the relevant entry under Schedule C of the Goa Value Added Tax Act, 2005.

Naidu also welcomed the decision by the Goa government, led by chief minister Pramod Sawant, saying the tax reduction could strengthen air connectivity and support the state’s tourism industry.

On X, the minister said that lower fuel costs could benefit airlines, improve connectivity and help Goa attract more visitors. “Lower fuel costs can support airlines, strengthen connectivity and give a further boost to Goa’s tourism sector. Steps like these put passengers and the growth of aviation first,” he said.

Air India and IndiGo back Goa’s decision

Goa’s tax reduction was also backed by major airlines – Air India and IndiGo.

Air India thanked Sawant for lowering ATF VAT, stating that the move could make Goa more accessible to travellers seeking to experience the state’s beaches, culture and hospitality.

“Goa is one of India's most loved destinations, and this move will make it easier for more travellers to reach its beaches, culture and hospitality. We hope this inspires other states to follow, so that more people can fly and explore India,” the airline wrote on X.

IndiGo had welcomed the Goa government’s decision on October 23, saying the revised tax structure could support the aviation ecosystem, improve air connectivity and strengthen tourism.

How lower ATF taxes can help

Reducing VAT on aviation turbine fuel lowers the tax component of airlines’ fuel bills, potentially easing their operating expenses. State governments have a direct role in this area because ATF remains outside India’s Goods and Services Tax (GST) framework, with VAT rates varying between states. According to PRS Legislative Research, high ATF prices combined with high state VAT rates have placed pressure on airline finances.

The benefits of lower taxes could extend beyond immediate cost relief. Reduced fuel expenses may improve the commercial viability of routes with relatively low passenger volumes, encourage airlines to increase flight frequencies and make it more attractive to operate services from airports outside major metropolitan centres.

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