India, April 29 -- The state government is considering a sharp cut in Value Added Tax (VAT) on aviation turbine fuel (ATF) to 1% from 18% at key airports, following a request from the Centre to ease rising airfares and support airlines. The move might cost the state exchequer nearly Rs.1,000 crore annual revenue loss.

The proposal follows the Centre's push for a temporary 3 to 6 month reduction in states with high ATF taxes, as geopolitical tensions drive up ticket prices. Maharashtra, which currently levies 18% VAT at major airports, is among four states under focus, along with Tamil Nadu, (29%), West Bengal (25%) and Delhi (20%).

Officials said the state already has a lower tax structure at smaller airports, it has 1% under the UDAN r...