In a major boost to the aviation sector, the Tamil Nadu government on Friday reduced the value-added tax (VAT) on aviation turbine fuel (ATF) supplied to scheduled airlines for domestic flights at Chennai airport from 29 per cent to 16 per cent. At all other airports in the State, the tax on jet fuel has been reduced to 1 per cent, according to reports in The Hindu and The Hindu BusinessLine.

Source: The Hindu BusinessLine

The concession takes effect at midnight between October 31 and November 1, 2026, and will remain in force until October 31, 2027, per a notification issued by the State's Commercial Taxes and Registration Department. For scheduled airlines operating aircraft with a maximum take-off mass below 40,000 kg and fuelling at airports other than Chennai, the rate was cut from 5 per cent to 1 per cent, The Hindu reported.

Source: The Hindu

Why it matters

The cut answers a long-standing demand of the airline industry, for whom fuel is the single largest cost — typically 40 to 45 per cent of operating expenses. With the revision, Chennai's ATF rate now stands on par with Telangana's 16 per cent and below Karnataka's 18 per cent, while the 1 per cent rate at other Tamil Nadu airports matches Andhra Pradesh's, according to data furnished by the Union Ministry of Petroleum and Natural Gas in the Lok Sabha and cited by The Hindu BusinessLine.

"This is a welcome move to establish some parity with neighbouring metro airports and stem the exodus of airlines choosing locations with lower fuel costs," said J. Krishnan of S. Natesa Iyer Logistics LLP, a Chennai-based freight forwarder, calling it "a small beginning" with "still a long road ahead to regain the lost primacy." Industry sources told The Hindu BusinessLine the move should improve the cost competitiveness of Tamil Nadu's airports and encourage more airlines to operate services to Chennai and other airports in the State.