Maharashtra Budget 2023: VAT on ATF cut by 8% for Mumbai and Pune to reduce flight costs

Taking off towards a recovery following pandemic pressure, airlines were looking for a reduction of excise duty on aviation fuel to shore up revenues in the Union Budget. Now the Maharashtra government has delivered much needed relief for the sector, with an 8 per cent reduction in the VAT levied on aviation turbine fuel.

The tax on ATF has now gone down from 25 per cent to 18 per cent for Mumbai, Pune and Raigad. The change was announced by Maharashtra Deputy CM Devendra Fadnavis, while presenting the state budget. The move comes a year after the central government blamed Maharashtra, then ruled by a non-BJP government, for higher VAT which made flight tickets expensive.

Although VAT on ATF in other parts of Maharashtra is 4 per cent, it had been high at 25 per cent for Mumbai, Pune and Raigad, which account for considerable air traffic. Apart from Maharashtra, Union Minister Hardeep Singh Puri had also pointed out high taxes on ATF in Delhi and West Bengal, while BJP-ruled UP and Nagaland only charge 1 per cent. All eyes are now on Delhi, while oil firms had already slashed aircraft fuel prices in the capital earlier this year.

On an average, states earn as much as Rs 3,000 crore a year from VAT, and before Maharashtra, about 23 states had lowered the levy. The move will reduce costs for airlines oeprating from the financial capital. Mumbai and Delhi being major hubs for aviation, the VAT on ATF charged in the cities has a decisive impact on ticket prices.