The Central Government has urged the Tamil Nadu Government to reduce the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) to enhance the viability of air travel and boost the aviation sector in the state. Tamil Nadu currently imposes a relatively higher VAT on ATF, which significantly increases operational costs for airlines, particularly on domestic routes.
Reducing VAT on ATF could lead to more competitive ticket pricing, encourage airlines to expand routes to and from Tamil Nadu, and attract increased passenger traffic. Additionally, it would benefit the state’s overall economy by boosting tourism, trade, and connectivity to underserved regions.
Several other states have already reduced VAT on ATF to as low as 1-4%, aligning with the Centre’s vision of making air travel affordable and accessible under the Ude Desh Ka Aam Naagrik (UDAN) scheme. Industry experts suggest that lowering VAT in Tamil Nadu could also incentivize airlines to set up operational hubs in cities like Chennai, Coimbatore, and Madurai, creating jobs and enhancing the state’s position as an aviation hub.
The Tamil Nadu government is expected to review the Centre’s request, balancing fiscal considerations with the potential economic benefits of promoting aviation growth in the state.
