The Finance Ministry has decided that it would not take any unilateral decision of compelling states to bring down sales tax rate on aviation turbine fuel as similar exercise on LPG way back in 2006 had fuelled protests.
"When we had taken a move which brought down VAT rate on LPG to the ceiling of 4 per cent from 12.5 per cent, states protested furiously. So, we will not go for such a decision in case of ATF, unless states agree," Finance Ministry sources said.
As such, the Ministry is waiting for the views of the Empowered Committee of State Finance Ministers on VAT on bringing ATF under declared goods status, even though there is pressure from Civil Aviation Ministry on cutting the tax rate, the sources said.
Once goods are categorised as declared goods, states cannot impose more than four per cent tax on it.
The Empowered Committee has, however, asked the Civil Aviation Ministry the whole gamut of questions like how ATF prices are fixed, what is the share of ATF in total costs of running an airline and so on, before firming up their views in this regard.
The VAT Panel had deferred the issue in its earlier meetings in the absence of answers to these questions and is slated to meet this month for this purpose.
Goods, which are of importance in the inter-state trade or commerce, are brought under this category. Currently this list includes items like paddy, rice, and other foodgrains, coal, cotton, iron and steel etc.
Interestingly, aviation turbine fuel sold to a Turbo-Prop Aircraft which is used for short-haul is already under the declared goods status.