Budget 2012: Hike CST to 4% or compensate adequately: States to Centre
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Irked over Centre's approach over CST compensation, states on Saturday asked it to either compensate them adequately for their revenue loss due reduction in the Central Sales Tax (CST) or increase the levy to earlier rate of 4 per cent.
The state Finance Ministers, during their meeting, also finalised a negative list of 35 services which would not be taxed under proposed Goods and Services Tax (GST) regime. "If the government does not release compensation then Center should revert to the CST levy of 4 per cent from the present 2 per cent level," Bihar Deputy CM and Finance Minister Sushil Kumar Modi told reporters after the meeting of the Empowered Committee of the State Finance Ministers.
"99 per cent of the states were of the opinion that either they should be compensated or the Centre should revert to 4% rate," he added.
At present, CST is payable on inter-state sales at 2 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 is trying to phase-out the CST and has promised to compensate the states for loss of revenue due to reduction in the CST rate to 2 per cent, from 4 per cent earlier. 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.
States expressed their resentment in the meeting after the Finance Ministry refused to compensate them for loss of revenue on account of reduction in CST from 2010-11 onwards. While the states have demanded a compensation of Rs 19,060 crore for 2010-11, the Centre said it has released Rs 6,393 crore and no more funds will be provided.