The Hindu Business Line : `Formal announcement of roadmap for CST phase-out in October'

THE VAT panel would formally announce a roadmap for central sales tax (CST) phaseout in October, the Member Secretary of the Panel, Mr Ramesh Chandra, said here on Sunday.

The trade and industry are making a case for early abolition of CST, arguing that this tax had no place in a value-added tax (VAT) regime. The elimination or phaseout of CST has, however, become an issue of discord between States.

Although CST had not been introduced as a revenue mobilisation measure, this tax had, over the years, grown to a level that States are finding it difficult to let go of such revenues. The CST was primarily introduced as a tax that would help track inter-State transactions. CST collections for last year stood at about Rs 18,000 crore.

The producing or manufacturing intensive States are now insisting that the Centre compensate them in perpetuity for the losses arising from the reduction or phaseout of CST.

"CST phaseout is a problem area. We will come up with a formal announcement of the roadmap for CST phaseout in the next 45 days (some time in October). I am hopeful that there would at least be a reduction in the rate from April 1 next year," Mr Chandra said at a seminar on VAT organised by the Federation of Indian Hardware Manufacturers & Traders Association.

Hardware traders and manufacturers from all over the country attended the seminar. Their main demand was that hardware should be treated as an industrial input and attract a VAT rate of 4 per cent in all the States. Currently, VAT rate on hardware items are at a variance in many VAT implementing States. For example, the VAT rate on hardware items is 4 per cent in Delhi and 12.5 per cent in Maharashtra.

Mr Chandra said that the Empowered Committee of State Finance Ministers has taken a view that hardware items are in the nature of "input items" and therefore should attract 4 per cent.

He, however, also clarified that the VAT panel does not usually take objection to the States' move to levy a VAT rate higher than the rate recommended by the VAT panel. "But we certainly frown upon States that levy a rate lower than the one recommended by the Empowered Committee," Mr Chandra said.

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