Centre willing to consider CST compensation issue: Modi

Last Updated: Tuesday, April 17, 2012 - 18:02

New Delhi: To facilitate the roll-out of GST from April, 2013 the Centre has assured that it is willing to consider states' demands of compensation for reduction in CST rate, Chairman of Empowered Committee of State Finance Ministers Sushil Kumar Modi said here on Tuesday.

"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 Minister, said.

He was talking to reporters after meeting Mukherjee to iron out differences over CST compensation.

CST is payable on inter-state sales at two per cent. 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 per cent from 4 per cent.

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 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 per cent.

"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," Modi said.

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 per cent 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 compensation issue.

The Centre, however, has said it cannot endlessly go on compensating states for the delay in implementation of GST.


First Published: Tuesday, April 17, 2012 - 18:02

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