The rethink comes after Chief Minister Narendra Modi government came under criticism from right-wing forces for its earlier decision to go ahead with the Supreme Court-appointed SIT's recommendation to seek death penalty for Kodnani, Bajrangi and others.
The state government had earlier given its consent to file an appeal in the High Court seeking death sentence for Kodnani, Bajrangi and others, who were awarded life term by a lower court.
"The decision has been withheld for now as we have to take opinion of state advocate general," Gujarat Finance Minister and spokesperson Nitin Patel said.
"A final decision will be taken after advocate general give his opinion," Patel added.
Kodnani, who was earlier a minister in the Modi government, was sentenced to 28 years in prison by a Special Court in August 2012 in connection with the post-Godhra Naroda Patiya riot case - in which 96 people were killed.
Bajrang Dal activist Babu Bajrangi was sentenced to jail for his entire life, while eight others were given 31 years' jail term each in the same case.