AN INTEGRATED MULTIDIMENSIONAL ECONOMIC, FINANCIAL, BEHAVIOURAL, GOVERNANCE AND POLITICAL IMPACT ASSESSMENT OF AVIATION FUEL TAX REFORM IN TAMIL NADU: FISCAL FEDERALISM, AIRLINE COST STRUCTURES, AIRFARE TRANSMISSION, REGIONAL CONNECTIVITY, INVESTMENT

Aviation turbine fuel (ATF) taxation influences airline operating costs, airfares, route viability and access to air travel. In India, ATF remains outside the Goods and Services Tax framework, giving states an important role in determining value-added tax (VAT) rates. Tamil Nadu’s announced reform reduces VAT on ATF for scheduled airlines from 29% to 16% at Chennai airport and to 1% at other airports, effective from 1 November 2026 to 31 October 2027. This study presents an integrated framework for assessing the reform’s economic, financial, behavioural, governance and political implications, with particular attention to fiscal federalism, airline costs, airfare transmission, regional connectivity, investment and inclusive development. The study adopts a descriptive and analytical design using secondary data from government departments, aviation authorities, airport statistics, budget documents, airline reports and research publications.