Delhi Airport Has A VAT Problem, Asks CM Kejriwal For Rate Parity With Noida Airport

The upcoming Noida International Airport could potentially pose a significant challenge for the Delhi Airport, with variation in value-added tax (VAT) on aviation turbine fuel between the two facilties.

Currently, Delhi imposes 25 per cent tax on jet fuel. In contrast, the Noida Airport, located in the neighboring Uttar Pradesh, levies a mere 1 per cent tax.

Concerned about potential business losses to the upcoming airport, GMR group-run Delhi International Airport Limited has urged Delhi Chief Minister Arvind Kejriwal to align the VAT on jet fuel with that of Noida Airport.

The plea has been made by PHD chamber of commerce and industry on behalf of the airport.

“For the first time after so many decades, National Capital Region will be going to have a second airport at Noida in the state of Uttar Pradesh and they shall be eligible for 1 per cent of VAT on ATF [Aviation Turbine Fuel]. Unless it is matched at Delhi airport with one per cent VAT, Delhi airport will become uncompetitive forcing airlines to shifting to new airport at Noida,” said PHDCCI executive director Ranjeet Mehta.

Delhi airport, which is the busiest airport in the country, is a member of chamber’s civil aviation committee.

The first phase of the Noida International Airport will be operational by the end of 2024, with one runway, and one terminal with the capacity to handle traffic of 12 million passengers annually.

India has the third largest domestic aviation market in the world, next only to the United States and China. But the VAT on aviation turbine fuel, imposed by states, currently hovers anywhere between 4 and 30 per cent.

Exorbitant taxes on jet fuel have significantly contributed to airline losses and the excessively burdensome operational expenses they face. ATF alone constitutes approximately 45 per cent of an airline's operational costs in the country.

Upon taking office in 2021, Union Aviation Minister Jyotiraditya Scindia advocated for a reduction in VAT. As a result, 19 states across the country have subsequently lowered the VAT on jet fuel.

However, five states still continue to levy high rates, with Bihar and Tamil Nadu at 29 per cent, Delhi and West Bengal at 25 per cent, and Assam at 23.65 per cent.

With the Finance Ministry not acquiescing to the longstanding request from the Aviation Ministry to reduce excise on ATF, the only way to rationalise jet fuel prices is through tax cuts by states.