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In a
meeting today, an empowered group of state finance
ministers decided against reducing tax on aviation
turbine fuel as the petroleum ministry was yet to
explain how jet fuel prices were fixed and whether there
was any scope for lower rates.
Bengal
finance minister and VAT panel chairman Asim Dasgupta
said, “We had asked the petroleum ministry for data
explaining the pricing policy in June. They are yet to
come up with it. The states feel they can’t take a
decision in vacuum.”
The state
ministers also rejected the central government’s
suggestion that jet fuel be classified as a declared
good and be taxed at a minimal 4 per cent to ease the
burden on airlines. This comes around 10 days after the
central government had set up a panel to study the
problems faced by the aviation industry.
The
Federation of Indian Airlines has been seeking a cut in
jet fuel taxes to 4 per cent from an average rate of 26
per cent across the country. Jet fuel accounts for 35-40
per cent of the operational cost of airlines and a tax
cut could help bring many out of the red. The industry
is believed to have suffered losses worth Rs 10,000
crore last year.
The FIA
had even threatened a strike but had to call it off
after a warning from the central government.
A declared
goods status for jet fuel has long been on demand. The
move could help reduce value-added tax on ATF from as
high as 29 per cent in some states to around 4 per cent.
Sales tax
on ATF is the lowest in Andhra Pradesh at 4 per cent,
while it is the highest in Tamil Nadu and Bihar at 29
per cent. In Bengal, the ATF charge is 25 per cent.
At
present, items such as paddy, rice and other foodgrains,
coal, cotton, iron, steel and LPG are on the declared
goods list as these are important for inter-state trade.
The
meeting of the state finance ministers also tried to
iron out differences over the introduction of goods and
services tax (GST) which is expected to reduce prices of
essential goods.
“The
overall burden of GST on the prices of essential
commodities will fall. We want this to fall particularly
in the case of essential goods,” Dasgupta said.
“Only a
very few states will be losing, many states will be
gaining in a very significant manner. The government
will also gain if revenue neutral rates are properly
worked out,” he added.
Sources
said Tamil Nadu had earlier objected to the GST regime
but later agreed to abide by joint decisions of the
panel and the state.
Dasgupta
and other members of the empowered committee may visit
Chennai to further ease out the differences and take on
board Tamil Nadu’s reservations.
When asked
if GST will be introduced as scheduled on April 1, 2010,
Dasgupta said, “Our intention is that.”
It was
also decided in the meeting that goods of local
importance such as puffed rice or local brew, which did
not affect inter-state commerce, would not be taxed.
Similarly,
there will be no levy on micro service providers and
goods manufacturers.
“Such
taxes are difficult to raise and hurt poor people. We
have accordingly to have this exempt category,” said
Dasgupta.
A debate
is still on within the panel on adopting either a single
unified GST rate or to make it a two-level tax where the
premium items will face a higher levy, he added.
Source :
Calcutta Telegraph, India, dated 22/08/2009
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