States have rejected the Civil Aviation Ministry's proposal for inclusion of jet fuel under 'Declared Goods' category, the government said today.
The inclusion would have reduced the price of Aviation Turbine Fuel (ATF) -- which accounts for 45 per cent of an airline's operational costs.
In a written reply to the Lok Sabha, Minister of State for Civil Aviation Mahesh Sharma said the Empowered Committee of State Finance Ministers has not agreed to the proposal for including ATF in the Declared Goods category.
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Under this category, the items cannot be taxed more than four per cent by a state.
The Ministry had taken up the issue of including ATF in the Declared Goods category with the Finance Ministry.
Sharma said the Empowered Committee of State Finance Ministers "unanimously agreed by the states that ATF should not be notified as Declared Goods".
According to Sharma, the Value Added Tax (VAT) on the fuel is up to 30 per cent and the Civil Aviation Ministry has been requesting state governments to reduce the tax on ATF to "make airline operations commercially viable".
"Some of the states like Odisha, Jharkhand, Madhya Pradesh, Andaman and Nicobar, Chattisgarh, Andhra Pradesh, Telangana and Punjab have responded positively and reduced VAT on ATF to 5 per cent or less.
"Some other states like Maharashtra, West Bengal and Rajasthan have selectively reduced the VAT on ATF," the Minister said.
