State cabinet on Tuesday approved the proposal for reduction of value-added tax (VAT) on aviation turbine fuel (ATF) from 29 per cent to 4 per cent .

The cabinet meeting, chaired by CM Nitish Kumar, approved the proposal of the commercial taxes department to reduce VAT on ATF with an aim to attract more commercial flights in the state.

"Earlier, 4 per cent VAT on ATF was applicable at Gaya airport only. But now, the reduced rate will be applicable at all airports in the state," deputy CM-cum-finance minister Samrat Choudhary said, soon after the cabinet decision.

In a statement Choudhary also said, "This decision will place Bihar among the leading states that have already reduced VAT on ATF to successfully expand air traffic.

He said that the 29 per cent tax rate on ATF in Bihar was higher compared to states like Uttar Pradesh, Jharkhand, Delhi, Gujarat, Maharashtra, etc. As a result, airlines preferred to purchase ATF in states where the VAT rate is lower.

According to the commercial tax department's data, the total VAT collection from ATF was Rs 62.28 crore in the fiscal year 2023-24, constituting only 0.16 per cent of the department's total revenue. In the year 2024-25, it was Rs 71.67 crore, which is approximately 0.17 per cent of the department's total revenue.

The deputy CM further said that this decision would elevate Bihar to new heights in terms of investment and tourism. "The expansion of air services will not only enhance travel experiences for the state's residents but also stimulate industrial activities, providing employment opportunities in various sectors of tourism and industry," he added.