Tamil Nadu may align ATF tax with neighboring states

In a move aimed at harmonising its aviation fuel tax with those of surrounding regions, Tamil Nadu is evaluating a reduction of the 29 percent VAT on aviation turbine fuel. The decision is slated for inclusion in the forthcoming state budget.

Government insiders report that the review is a response to repeated central government appeals for a rationalised ATF tax structure across the country. By lowering the levy, the state hopes to cut operating expenses for airlines, improve airport competitiveness and strengthen air links.

Comparative data released by the Ministry of Petroleum and Natural Gas earlier this year showed that Andhra Pradesh applies only a 1 percent VAT on ATF, whereas Karnataka's rate stands at 18 percent. Other southern states sit between these extremes.

Maharashtra and Delhi have already reduced their ATF VAT to 7 percent, signalling a broader national trend toward tax relief for the aviation sector. If Tamil Nadu follows suit, it will join a small group of states offering a more attractive tax environment for carriers.

Stakeholders anticipate that the change will encourage airlines to add more flights, expand connectivity and boost passenger volumes at Tamil Nadu's airports.