Bihar Slashes ATF VAT to 4% to Boost Aviation

04 Jun 2025 CW Team

In a major push to strengthen air connectivity and attract airline operations, the Bihar government has reduced the value-added tax (VAT) on aviation turbine fuel (ATF) from 29 per cent to 4 per cent. The announcement, made by Deputy Chief Minister Samrat Choudhary on 3 June, brings the state in line with others promoting aviation-led growth.

The revised VAT rate, previously applicable only at Gaya Airport, will now extend to all operational airports in Bihar, including Patna. However, flights operating under the Regional Connectivity Scheme (RCS) will continue to enjoy a 1 per cent VAT rate.

Choudhary stated that the earlier tax structure made Bihar less competitive compared to states like Uttar Pradesh, Jharkhand, Delhi, Gujarat, and Maharashtra, where lower ATF taxes had already encouraged airline refuelling and expansion. “With this tax cut, Bihar joins the ranks of progressive states driving aviation growth through policy reform,” he said.

Despite the 29 per cent tax rate, VAT collections from ATF were negligible—just Rs 622.8 million in 2023–24, or 0.16 per cent of the Commercial Tax Department’s total revenue. In 2024–25, revenue rose marginally to Rs 716.7 million, or 0.17 per cent of total receipts.

Officials expect the tax cut to stimulate air traffic, reduce ticket costs, and incentivise airlines to increase flight frequency to and from Bihar. The move is also seen as a catalyst for tourism and industrial development, with improved air access expected to generate employment and attract investment.

Choudhary added that the decision was made following a request from the central government and reflects Bihar’s broader commitment to enhancing infrastructure and economic competitiveness.

Image source:https://www.aai.aero/hi/airports/gaya

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