Maharashtra Government Cuts ATF VAT to 7%: Big Relief for InterGlobe Aviation, Air India Amid Rising Jet Fuel Prices

15 May 2026 , 02:34 PM

The Maharashtra Government has announced a major reduction in Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), lowering the tax rate from 18% to 7% until November 14. The move comes at a critical time for the aviation sector as airlines continue to battle soaring fuel prices triggered by the ongoing West Asia conflict.

The decision is expected to provide substantial cost relief to major airlines including InterGlobe Aviation, the parent company of IndiGo, and Air India, both of which have been grappling with rising operational expenses due to elevated jet fuel prices.

Maharashtra Government News: Relief for Airlines

Fuel remains one of the largest cost components for Indian airlines, accounting for nearly 35–40% of total operating expenses. The sharp rise in global crude oil and jet fuel prices has significantly impacted airline profitability over recent months.

According to industry data, global jet fuel prices surged to $162.89 per barrel for the week ended May 8, compared to $99.40 per barrel at the end of February. The spike has intensified pressure on airline balance sheets and raised concerns over potential fare hikes and route rationalisation.

The Ministry of Civil Aviation had earlier urged high-tax states such as Maharashtra, Delhi, Tamil Nadu, and West Bengal to reduce VAT on ATF in order to support the aviation industry during the ongoing geopolitical crisis.

Mumbai Airport to Become More Competitive

The VAT reduction is expected to sharply reduce refuelling costs at Mumbai airport, India’s second busiest airport, which handles nearly 15% of the country’s domestic air traffic.

With Maharashtra now imposing only 7% VAT on ATF, Mumbai becomes significantly more competitive compared to Delhi, where ATF VAT continues to remain at 25%. Industry experts believe airlines may increasingly prefer refuelling in Mumbai, Pune, and Nagpur airports to optimise fuel costs and improve operational efficiency.

Impact on InterGlobe Aviation and Air India

The tax reduction could particularly benefit InterGlobe Aviation and Air India, which operate extensive domestic and international networks from Mumbai.

Lower fuel taxes are expected to help airlines improve operating margins and partially offset the impact of rising global energy prices. Aviation companies have long argued that percentage-based VAT amplifies the impact of volatile global fuel prices, making cost management increasingly difficult.

Airlines are also demanding that ATF be brought under the Goods and Services Tax (GST) regime, which would allow them to claim input tax credit (ITC) benefits and reduce overall tax burdens.

Air India Announces Temporary Service Reduction

Amid the continued surge in fuel costs, Air India has already announced a temporary reduction in certain international services for three months starting June.

The airline has also warned that additional flight cuts may be necessary if jet fuel prices remain elevated in the coming months.

The Maharashtra government’s VAT reduction is therefore being viewed as a timely intervention that could provide short-term financial relief to carriers operating from the state.

Aviation Industry Seeks Long-Term Reform

While the VAT cut offers immediate support, aviation industry stakeholders continue to push for structural reforms in ATF taxation. Industry bodies maintain that bringing ATF under GST would create a more stable and uniform tax structure across states while reducing cost volatility for airlines.

For now, the Maharashtra Government’s decision is expected to ease pressure on airline finances and improve the competitiveness of airports in the state amid one of the sharpest rises in global jet fuel prices in recent years.