Centre willing to consider CST compensation issue:
To facilitate the rollout of the Goods and Services Tax
(GST) from April, 2013 the Centre has assured that it is
willing to consider states' demands of compensation for
reduction in the Central Sales Tax (CST) rate, Chairman
of Empowered Committee of State Finance Ministers Sushil
Kumar Modi said here today.
"We discussed the entire GST in detail with the Finance
Minister [Pranab Mukherjee], including the CST
compensation. The minister said chapter of compensation
is not closed and he has an open mind regarding
compensation," Modi, who is also the Bihar Deputy Chief
He was talking to reporters after meeting Mukherjee to iron out differences over
CST is payable on inter-state sales at 2%. Although CST is levied by the Centre,
the revenue goes to the state government and the state from which movement of
goods commences gets revenue.
The Centre has promised to compensate states for loss of revenue due to
reduction in CST rate to 2% from 4%.
The state governments had expressed dissent over the Rs 300 crore CST
compensation proposed in Budget 2012-13. This was against their overall demand
of over Rs 19,000 crore.
The states have demanded that either the Centre should pay the compensation in
full or restore the levy to original level of 4%.
"Committee of some senior official of the central government and from states
will sit together and sort out this problem of compensation. And in the first
week of May, Finance Minister will have meeting with state finance ministers,"
The implementation of Goods and Services Tax (GST) has been hanging in fire
since April 1, 2010, the first scheduled date for implementation of the new
indirect tax regime. The GST Bill is now pending in Parliament.
"I am confident that by April 2013, GST can come because the Bill is pending
before Parliamentary Standing Committee and they will start discussion on the
Bill in the second or third week of May," Modi added.
In 2006, states and the Centre had reached an agreement to cut CST by 1% every
year beginning April 1, 2007 and eliminate it by April 1, 2010 to coincide with
launch of GST.
CST phase-out is part of the introduction of the new GST regime under which
various levies like excise, service tax and states tax, like value-added tax,
entry tax and purchase tax would be subsumed in a single tax.
Several Chief Ministers, including West Bengal's Mamata Banerjee and Tamil
Nadu's J Jayalalithaa have already expressed their resentment on the CST
The Centre, however, has said it cannot endlessly go on compensating states for
the delay in implementation of GST.
Business Standard, India, dated