The Centre resolved the Issue of CST Compensation with the States

Jan 29, 2013 16:56 IST

The Centre on 29 January 2013 resolved the issue of CST compensation with the states. The centre agreed for a lower payment of 34000 crore rupees for phasing out the Central Sales Tax. It paves the way for implementation of the Goods and Services Tax (GST). The agreement between centre and states was announced following the meeting of State Finance Ministers at Bhubaneshwar. The Centre agreed to pay this compensation amount to the states.

As per the resolution at the meeting, the Centre would bear a 100 per cent of the loss accrued to states in 2010-11 fiscal on account of lowering of CST. However, for the 2011-12 and 2012-13 fiscal, the Centre would give 75 per cent and 50 per cent of the losses to the states.

CST, a tax imposed on the inter-state movement of goods, was reduced from 4 per cent to 3 per cent in 2007-08 and further to 2 per cent in 2008-09 after the introduction of Value-Added Tax (VAT). The committee set up by Finance Minister P Chidambaram to resolve the CST issue had suggested that the payment of 34000 crore rupees be made to the states towards losses on account of phasing out of CST.

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