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CST Rate reduction delayed further

There was speculation that the rate of tax would be reduced to 2% with effect from 1st May 2008.

It is now official that the issue would be discussed at the meeting of the Empowered Committee of Finance Ministers on 5th May 2008 at the meeting to be held at Trivandrum.

Do not expect any announcement of the date from which CST rate would be reduced as the meeting would only discuss a new compensation formula to be placed before the Central Government.

Centre and states have been unable to work out a package to compensate states in 2008-09 for the losses from the reduction, estimated at anywhere between Rs 6,000 crore to Rs 13,000 crore. The disagreement on the compensation package has already delayed the rate cut.

The Centre’s proposal to hike the VAT rate of 4% to 5% is not acceptable to the State Governments on account of the approaching elections in many states as well as high inflation. The States want higher monetary compensation from the Centre, which is not acceptable to the Centre.

The official line from the Central Government is - “Consultations are underway on the compensation for losses, if any, and once agreement is reached the new rate will be notified”.

When would that be? Your guess is as good as mine!

CST Rate of tax

The Commissioner of Commercial taxes, Tamil Nadu has advised that CST rate continues to be 3% as the Central Government has not yet issued necessary notification.

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