Chennai: The Tamil Nadu government led by Tamilaga Vettri Kazhagam (TVK) chief C. Joseph Vijay is preparing to reduce the State-level Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), a move aimed at lowering airline operating costs and making the State’s aviation sector more competitive. The proposal is expected to be announced in the forthcoming State Budget as part of a broader effort to align Tamil Nadu’s tax structure with those of neighbouring States.
Officials familiar with the proposal said the government is reviewing the existing 29 per cent VAT on ATF, one of the highest in the country. The revised rate is expected to be announced as part of the State Budget, although the exact percentage is yet to be finalised.
The proposed reduction follows repeated appeals from the Union government, which has been urging States to rationalise taxes on aviation fuel.
ATF is among the largest operating expenses for airlines, and industry stakeholders have long argued that lower State taxes would help reduce costs, improve connectivity and encourage airlines to expand services.
Data submitted by the Union Ministry of Petroleum and Natural Gas to the Lok Sabha earlier this year highlights the wide variation in ATF tax rates across southern States.
Andhra Pradesh levies just one per cent VAT, while Puducherry charges 14.5 per cent, Telangana 16 per cent and Karnataka 18 per cent.
Kerala follows a different taxation structure, imposing a five per cent sales tax along with a one per cent cess on the tax amount. In addition, the State’s four airports—Thiruvananthapuram, Kochi (Nedumbassery), Kannur and Kozhikode—levy one per cent tax and one per cent cess.
Tamil Nadu’s proposed move also comes amid a broader national trend of reducing taxes on aviation fuel.
Around two months ago, both Maharashtra and Delhi slashed their VAT on ATF to seven per cent from 18 per cent and 25 per cent, respectively. While Delhi introduced the reduction for an initial six-month period, Maharashtra did not specify any time limit for the revised rate.
If implemented, the reduction would make Tamil Nadu one of the latest States to rationalise taxes on aviation fuel, a step that is expected to improve the competitiveness of its airports, support airline operations and strengthen air connectivity.
The decision would also bring the State closer to the lower ATF tax regimes followed by several neighbouring States, which have long been viewed as more attractive destinations for airline operators
