Centre, states agree on joint mechanism on CST compensation
New Delhi: The Centre and states on Monday
agreed for a joint mechanism to offset losses arising out of
Central Sales Tax cut affected in 2007-08, a matter that has
not yet been resolved due to differences on the amount of
The decision was taken at a meeting of states finance
ministers and Union Finance Minister Pranab Mukherjee here.
"There will be a joint mechanism (for compensation)
involving Government of India officials and Empowered
Committee Secretariat and states officials to facilitate the
compensation more clearly," Asim Dasgupta, chairman of
empowered committee of states finance ministers on Value Added
Tax, told reporters after the meeting.
CST, a tax on movement of goods from one state to
another, was reduced from 4 percent to 3 percent in 2007-08
and further to 2 per cent in 2008-09 after the introduction of
VAT as it is considered distortionary.
Differences still persist on the amount of compensation
but Dasgupta expressed hope that it would be sorted out and
the Goods and Services Tax roll-out will not be delayed.
"We had discussed issues relating to compensation for
losses to states due to reduction of CST... there will soon be
convergence of views arrived at by union finance ministry and
us working together to resolve the issue," he said.
Dasgupta, refused to divulge any figure when asked about
the amount of losses. Sources, however, said according to the
Centre, states' claim should be Rs 14,000 crore.