Even though Indian carriers described the Centre's decision to cut price of aviation turbine fuel as "insignificant", industry sources said the "marginal" reduction of four per cent would not affect fares or fuel costs.
However, if state governments too slashed the high sales tax on ATF, the impact on airlines' operating costs would be more, the sources said.
Besides yesterday's cuts in duties on ATF announced by the Centre, only Andhra Pradesh and Maharashtra have reduced sales tax rate to four per cent.
Kerala, in this year's budget, has also announced a proposal to reduce it from 28.75 per cent to four and the budget is yet to be passed.
Maharashtra, however, has excluded airports in Mumbai and Pune, which cater to most of the air traffic, from the reduction and the tax rate there remain at 25 per cent.
The highest sales tax rate of 30 per cent is in BJP-ruled Gujarat, followed by 29 per cent in Bihar and Tamil Nadu and 28.75 in Madhya Pradesh. The rate in Karnataka and Rajasthan is 28 per cent.
The Civil Aviation Ministry has been pressing the Centre to recognise ATF as a 'declared good' which would enable imposition of a flat four per cent tax on it.
