Daman Cuts Aviation Fuel VAT by 66.67%; Airfares Uncertain

VAPI: The launch of air services from Daman has been followed by a sharp reduction in aviation fuel tax, but whether the move will translate into cheaper air tickets remains uncertain. The Union Territory administration has cut Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 3% to 1%, a reduction of 66.67%.

The decision is expected to lower the tax component of fuel purchases for airlines operating from Daman. However, the extent of any savings for passengers will depend on how airlines adjust fares amid other operational costs.

The reduction comes after the inauguration of Daman’s domestic airport under the Centre’s Regional Connectivity Scheme, UDAN. Air connectivity has expanded with the launch of a direct Daman–Delhi service, followed by direct flights linking the coastal Union Territory with Mumbai and Ahmedabad.

With flight operations gaining momentum, the administration of Dadra and Nagar Haveli and Daman and Diu has revised the tax rate on ATF to 1%, bringing it in line with the rate applicable under the UDAN framework, as stated in the announcement.

Will passengers get cheaper tickets?

A lower VAT rate can reduce the tax burden on aviation fuel, one of the significant operating expenses for airlines. Yet the reduction does not automatically guarantee lower fares, as ticket prices are influenced by several factors, including fuel prices, aircraft operating costs, airport charges, demand and airline pricing strategies.

The key question is whether airlines will pass on some or all of the savings to passengers or retain them to offset other expenses.

The administration’s move comes at a crucial stage for Daman’s emerging air connectivity, as direct services to major cities could improve access for residents, tourists and business travellers. Lower operating costs could potentially support the expansion of regional aviation, although the actual impact will depend on airline decisions.

For now, passengers hoping for cheaper flights will have to wait to see whether the VAT cut leads to changes in ticket prices. No immediate fare reduction has been confirmed in the information released alongside the tax decision.