Centre suggests states cut tax on aviation fuel

Mumbai: In a move to cut the high state taxes on aviation turbine fuel (ATF), the central government has suggested states agree to classify the item in the ‘declared goods’ category.
The matter has been referred by the Union finance ministry to the Empowered Group of State Finance Ministers on tax matters. The value added tax (VAT) on ATF is usually between 24 and 35 per cent. VAT is a state subject. However, under Section 14 of the law on Central Sales Tax, if an item is part of the ‘declared goods’ category, the rate can be brought down to four per cent.
The move follows a meeting last week between the Prime Minister and heads of various aviation companies, where the latter pleaded for help in their financially difficult position. The tax on ATF, which forms at least 40 per cent of their operating cost, was on the agenda. At present, ATF is part of the ‘declared goods’ list only in a few states, Maharashtra being one. The tax there is four per cent.
Sources said the finance ministry was also looking into the possibility of a financial bailout for private banks in terms of a debt recast by banks.
03/12/11 Anindita Dey/Business Standard

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Categories: Indian Aviation- In General Dec 2011