Airlines operating in Maharashtra will continue to benefit from lower fuel tax rates after the state government announced an extension of its concessional 7% Value Added Tax (VAT) on aviation turbine fuel (ATF). According to a notification issued by the Maharashtra Finance Department on November 12, the lower tax rate will remain in place until April 14, 2027.
The reduced rate, which was originally lowered from 18% to 7% in May 2026, was scheduled to expire on November 14, 2026. The extension provides carriers with six additional months of tax relief, maintaining the existing rate rather than introducing a new tax cut. The government's decision follows requests from the Federation of Indian Airlines (FIA), which represents carriers including IndiGo, Air India, and SpiceJet.
Airlines have reported significant financial pressure due to rising jet fuel prices, which now constitute between 40% and 55% of their total operating expenses, according to FIA data. This represents an increase from the typical range of 30% to 40%. Carriers argued that the tax concession helps manage these costs while encouraging more fuel purchases within the state, a trend the FIA noted previously helped boost fuel sales in Delhi by 40% after a similar tax reduction.
The aviation sector has faced cumulative challenges, including increased fuel consumption and crew expenses caused by longer flight routes due to airspace restrictions linked to the ongoing conflict in West Asia. Additionally, the depreciation of the rupee has increased the cost of foreign currency payments for aircraft maintenance, leasing, and insurance, leading some airlines to introduce fuel surcharges and raise ticket prices.
Key facts
- The Maharashtra government extended the 7% VAT rate on duty-paid ATF until April 14, 2027.
- The initial tax reduction from 18% to 7% was implemented by the state on May 15, 2026.
- Fuel currently accounts for approximately 40% to 55% of airline operating expenses.
- The Finance Department's official notification regarding the extension was released on November 12, 2026.
Why it matters
For airlines, the extension provides greater financial certainty and stability regarding fuel expenses in the coming months. Industry analysts note that maintaining these lower VAT rates in major aviation hubs like Maharashtra and potentially Delhi is expected to help airlines mitigate the impact of high operational costs and avoid further drastic increases in passenger ticket prices.
Background
The state government first introduced the tax concession in May 2026 to assist carriers in managing rising operating costs following a surge in global crude oil prices and operational disruptions caused by geopolitical tensions.
Source: Livemint, Hindustan Times
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