Centre-State faceoff on CST payout may put GST
Amidst repeated complaints of inadequate compensation
for revenue loss due to lower CST rate, the Union
Finance Ministry today said it cannot compensate them
"endlessly for as many years as GST does not come".
The Central Sales Tax (CST) is imposed by the Centre but
revenue goes to the states. CST rate has been reduced to
2 per cent, from 4 per cent earlier, as part of the
phasing out of the tax in backdrop of proposed Goods and
Services Tax (GST).
"Compensation was originally planned for 3 years. Government of
India cannot keep paying compensation endlessly for as many years as GST does
not come," Finance Secretary R S Gujral said while addressing a FICCI
post-Budget event here.
While the states had demanded a compensation of Rs 19,060 crore for 2010-11, the
Centre released Rs 6,393 crore against the same.
The ministry in January had told the state governments that no further
compensation would be provided on account of phasing out of CST.
Gujral said GST was originally scheduled to come from April 1, 2011, and the
compensation package to the states was decided after discussing with the
Empowered Committee of State Finance Ministers.
"Whatever compensation which has been paid was agreed to by the empowered
committee," Gujral said.
Acknowledging the financial stress being faced by the Centre, the Empowered
Committee of State Finance Ministers had recently proposed that if CST
compensation cannot be provided, than rate of levy should be doubled to 4 per
GST would subsume levies like excise, service tax and states tax like
value-added tax, entry tax and purchase tax.
While the GST Constitutional Amendment Bill is currently being studied by a
Parliamentary Standing Committee, the structure of GST Network (GSTN) has been
approved by the Empowered Committee of State Finance Ministers. It will be set
up as a National Information Utility and become operational by August 2012.
"In (regards to) GSTN we are moving very well. We are going to take the matter
to Cabinet in next few weeks," Gujral said.
Later in the day, Standing Committee on Finance Chairman Yashwant Sinha said the
panel would try to finalise its report on GST Bill at the earliest.