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State mulls ATF tax cut to 1% as airfares surge
Maharashtra is considering a blanket ATF VAT cut to 1% amid rising airfares, amid a Centre push for temporary reductions in high-ATF states. The state currently taxes 18% at major airports, with four states listed as focus and a potential ₹1000 crore hit to the exchequer if cut to 1%. The article notes existing 1% ATF VAT under UDAN at smaller airports and competition from neighbouring states like Gujarat and Goa that have lower rates.
Why It Matters
If adopted, the tax cut could shift aviation traffic and refuelling operations, affecting state finances and airline routing amid regional tax competition.
Timeline
5 Events
Gujarat and Goa reductions cited as competitive pressure
April 28, 2026
Competition from neighbouring states is noted, with Gujarat and Goa having reduced VAT to 1% and 8% respectively, prompting concerns that airlines could refuel in neighboring states.
Proposed reduction to 1% could burden exchequer; political decision noted
April 28, 2026
Officials said that reducing ATF VAT to 1% would impose a financial burden of ₹1000 crore on the exchequer, and that such a decision would be political, to be taken by the police leadership, according to a finance department official.
Maharashtra among four states under focus; current ATF VAT levels listed
April 28, 2026
Maharashtra currently levies 18% VAT at major airports, with four states under focus: Tamil Nadu (29%), West Bengal (25%), Delhi (20%). The state’s existing tax structure at smaller airports is lower, and blanket cuts would impact finances.
Centre pushes for temporary ATF tax reduction in high-tax states
April 28, 2026
The proposal follows the Centre’s push for a temporary 3 to 6 month reduction in states with high ATF taxes, as geopolitical tensions drive up ticket prices.
Maharashtra already has 1% ATF VAT under UDAN and 5% elsewhere; 2023 cut from 25% to 18%
2023
Maharashtra previously reduced ATF VAT from 25% to 18% in 2023 to remain competitive. The state currently has 1% ATF VAT at smaller airports under UDAN and 5% elsewhere.