Maharashtra to reconsider selective reduction of VAT on ATF

Mumbai: The Maharashtra government's decision to retain value added tax (VAT) on aviation turbine fuel (ATF) at 25 per cent for the Mumbai and Pune airports, even as it was reduced to four per cent at other State airports left the aviation industry in the country puzzled. It appears that with the ministry of civil aviation (MoCA) taking a proactive stand in questioning this arbitrary move and asking the State government to reconsider its decision, the issue may now be taken up for consideration at the next meeting of the State cabinet.

Maharashtra's finance minister, Jayant Patil, had reduced tax on ATF from 25 per cent to 4 per cent, in the State budget (fiscal year 2008-09) excluding Mumbai and Pune, the two main airports, which draw the vast bulk of air traffic. The reduction of VAT on ATF, therefore, became a meaningless exercise.

Reports suggest that the State's revenue minister, Narayan Rane, has already forwarded the proposal to the state finance minister for his, and the State cabinet's, consideration at the next cabinet meeting.

In its letter, MoCA  has apparently questioned the differential tax pricing for the Mumbai and Pune airports and rest of Maharashtra, citing the recent examples of Andhra Pradesh and Kerala, which too have reduced VAT to a four per cent level. The MoCA letter has compelled the State government to provide an adequate response.