But fears remain the tax will be resurrected.

In December the ATO made a ruling to add GST on to the cost of interment.

This would have added up to $1000 to the cost of graves, cremations and crypts effective from yesterday, February 12.

As one of five Class A Cemetery Trusts in the state affected by the ruling, the Bendigo cemeteries trust (Remembrance Parks Central Victoria) and Bendigo families would have had to pay 10 per cent tax on interment.

But on Tuesday the ATO dropped the ruling after the Victorian Government objected.

Victoria's Minister for Health David Davis said he was pleased that common sense had prevailed.

“It is a longstanding principle that burials are not taxed," Mr Davis said.

"Victorians, at  a time of grief, deserve to be able to arrange a burial at a reasonable  cost.

“The Coalition Government has vigorously advocated for that position, and  that work has been successful.”

Bendigo Funerals director Simon Mulqueen welcomed the overturned ruling but feared the ATO could try to reintroduce it.

“From the public’s perspective it (the reversal) is positive as the fees won’t go up, but there’s always the chance the ATO may revisit it,” Mr Mulqueen said.

“Hopefully they have given up on it but I would be surprised if it’s not revisited.

“It’s the third time the ATO has reviewed cemetery fees.”

Mr Mulqueen said the GST would have been a “nightmare” for cemetery trusts and for families who, he said, were already paying among the highest cemetery fees in the state.

Remembrance Parks Central Victoria chief executive Graham Fountain also welcomed the reversal.

“This is great news and avoids any additional price impact on the community at its  most vulnerable time, “ Mr Fountain said.

“The right decision has been made and we just need to move forward from there.”

He said any future ruling was up to the Tax Office but said it needed to consider the community in its decisions, “especially vulnerable communities at a time of grieving”.