Kerala - Thiruvananthapuram   

Move on ATF tax flayed

THIRUVANANTHAPURAM: Kerala is strongly opposed to the Union Finance Ministry’s proposal to accord ‘declared goods’ status to aviation turbine fuel (ATF) by the year-end to enable the domestic airlines industry to save on fuel cost in recession time.

Once the status is given to ATF through an amendment to the Central Sales Tax Act, the States can levy sales tax only at a standard rate of four per cent on the commodity. The States face a combined annual revenue loss of Rs.3,500 crore through the proposal, since most of them are now levying more than four per cent tax on the commodity.

Finance Minister T.M. Thomas Isaac said here on Monday that it was unjust for the Centre to deprive the States of their sources of revenue. The States were all experiencing financial difficulties. The recession now in progress had also started reflecting adversely on the revenue receipts of most of the States.

The States, in fact, required more resources at this moment to see to it that the vulnerable sections of society were given support in a time of difficulty like this through measures such as creation of employment at the lowest levels.

This proposal to accord ‘declared goods’ status to ATF was an invasion into the limited fiscal resources of the States, Dr. Isaac said adding such tendencies on the part of the Centre would spoil the Centre-State fiscal relations.

P. Chidambaram, as Union Finance Minister last Monday (before he was posted as Union Home Minister following Shivraj Patil’s resignation from the post), had said that he was in favour of amending the Central Sales Tax Act to accord “declared goods” status to ATF if there was sufficient support in Parliament for the proposal.

Dr. Isaac said there was no way the States could support the move.

Kerala would present the States’ case strongly at the next meeting of the State Finance Ministers scheduled in the second week of this month, he added.

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