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India Launches Study to Address Financial Stress in Airlines, Calls for GST Reforms
In a bid to lift its beleaguered airline industry out of the post‑pandemic slump, the Union Ministry of Civil Aviation announced on June 1, 2026, a comprehensive study aimed at diagnosing the structural challenges that have left several Indian carriers financially strained.
The investigation, which began in early June, will collect input from airlines, industry bodies and other stakeholders on reforms needed across policy, regulation, operations, contracts, procurement and related areas. Its goal is to craft a set of recommendations that could be presented to Parliament in the first quarter of 2027.
The study follows a series of financial difficulties that have plagued the sector since the COVID‑19 pandemic. Airlines such as Jet Airways, GoAir (now Go First) and Kingfisher have either ceased operations or entered insolvency proceedings. Jet Airways, once the country’s largest private carrier, was ordered into liquidation by the Supreme Court in November 2024 after years of mounting losses. The pandemic’s impact on passenger traffic, coupled with high operating costs, has left many carriers vulnerable.
A key focus of the ministry’s inquiry is the tax burden on aviation turbine fuel (ATF). ATF accounts for roughly 30‑40 % of an airline’s operating expenses. Until recently, ATF was excluded from the Goods and Services Tax (GST) regime, forcing airlines to pay state taxes that vary by region. In December 2025, Indian Oil Corporation raised ATF prices by 1.45 %, pushing the Delhi per‑kilogram cost to ₹91,856.84. The ministry has therefore urged the inclusion of ATF under GST at a 5 % rate, enabling airlines to recover the tax as input credit.
In addition to fuel, the study will examine the GST structure on flight tickets. Currently, domestic tickets are taxed at 5 % for economy class and 12 % for business class, while international tickets carry a 5 % rate for economy and 18 % for premium cabins. The ministry has called for a single 5 % GST slab for all ticket classes, arguing that a uniform rate would simplify compliance and reduce costs.
The reforms are also intended to address the broader ATF tax crisis that has emerged in 2026. High jet fuel taxes, combined with state VAT cuts that have not been fully harmonised, have strained airlines’ cash flows. The ministry’s study will assess whether a GST‑based framework can provide a more stable and predictable tax environment.
Industry analysts note that the reforms could be pivotal for India’s ambition to become a global aviation hub. According to the International Air Transport Association, India’s domestic air traffic grew at 6.9 % in 2024, making it the world’s fastest‑growing domestic market. Low‑cost carriers dominate the landscape, accounting for 71 % of scheduled seats, with IndiGo, Air India and Air India Express holding the largest shares.
The study will also look at procurement and contract practices. Airlines have long argued that fragmented supplier contracts and lack of standardised procurement processes increase costs. By streamlining procurement and encouraging bulk purchasing agreements, the ministry hopes to reduce operational expenses.
The government has already taken steps to support the sector. In March 2026, it approved a ₹10,000‑crore fund to provide emergency liquidity to airlines facing cash‑flow crunches. Major carriers, including Air India, IndiGo, SpiceJet and Akasa Air, welcomed the move, citing the need for immediate financial relief.
The study’s findings are expected to be released in the first quarter of 2027. The ministry plans to use the results to draft policy recommendations that will be presented to Parliament for approval. The reforms are anticipated to mitigate financial distress, enhance sector resilience and support sustainable growth.
In the meantime, airlines continue to navigate a challenging environment. While some carriers have secured new funding, others remain in distress. The outcome of the ministry’s study will be closely watched by industry stakeholders, investors and regulators as India seeks to stabilise its aviation sector and maintain its trajectory of rapid growth.
The investigation, which began in early June, will collect input from airlines, industry bodies and other stakeholders on reforms needed across policy, regulation, operations, contracts, procurement and related areas. Its goal is to craft a set of recommendations that could be presented to Parliament in the first quarter of 2027.
The study follows a series of financial difficulties that have plagued the sector since the COVID‑19 pandemic. Airlines such as Jet Airways, GoAir (now Go First) and Kingfisher have either ceased operations or entered insolvency proceedings. Jet Airways, once the country’s largest private carrier, was ordered into liquidation by the Supreme Court in November 2024 after years of mounting losses. The pandemic’s impact on passenger traffic, coupled with high operating costs, has left many carriers vulnerable.
A key focus of the ministry’s inquiry is the tax burden on aviation turbine fuel (ATF). ATF accounts for roughly 30‑40 % of an airline’s operating expenses. Until recently, ATF was excluded from the Goods and Services Tax (GST) regime, forcing airlines to pay state taxes that vary by region. In December 2025, Indian Oil Corporation raised ATF prices by 1.45 %, pushing the Delhi per‑kilogram cost to ₹91,856.84. The ministry has therefore urged the inclusion of ATF under GST at a 5 % rate, enabling airlines to recover the tax as input credit.
In addition to fuel, the study will examine the GST structure on flight tickets. Currently, domestic tickets are taxed at 5 % for economy class and 12 % for business class, while international tickets carry a 5 % rate for economy and 18 % for premium cabins. The ministry has called for a single 5 % GST slab for all ticket classes, arguing that a uniform rate would simplify compliance and reduce costs.
The reforms are also intended to address the broader ATF tax crisis that has emerged in 2026. High jet fuel taxes, combined with state VAT cuts that have not been fully harmonised, have strained airlines’ cash flows. The ministry’s study will assess whether a GST‑based framework can provide a more stable and predictable tax environment.
Industry analysts note that the reforms could be pivotal for India’s ambition to become a global aviation hub. According to the International Air Transport Association, India’s domestic air traffic grew at 6.9 % in 2024, making it the world’s fastest‑growing domestic market. Low‑cost carriers dominate the landscape, accounting for 71 % of scheduled seats, with IndiGo, Air India and Air India Express holding the largest shares.
The study will also look at procurement and contract practices. Airlines have long argued that fragmented supplier contracts and lack of standardised procurement processes increase costs. By streamlining procurement and encouraging bulk purchasing agreements, the ministry hopes to reduce operational expenses.
The government has already taken steps to support the sector. In March 2026, it approved a ₹10,000‑crore fund to provide emergency liquidity to airlines facing cash‑flow crunches. Major carriers, including Air India, IndiGo, SpiceJet and Akasa Air, welcomed the move, citing the need for immediate financial relief.
The study’s findings are expected to be released in the first quarter of 2027. The ministry plans to use the results to draft policy recommendations that will be presented to Parliament for approval. The reforms are anticipated to mitigate financial distress, enhance sector resilience and support sustainable growth.
In the meantime, airlines continue to navigate a challenging environment. While some carriers have secured new funding, others remain in distress. The outcome of the ministry’s study will be closely watched by industry stakeholders, investors and regulators as India seeks to stabilise its aviation sector and maintain its trajectory of rapid growth.
