The Hindu Business Line : Finance Ministers agree for cut in CST rate to 2 pc

STATE Finance Ministers today agreed to a reduction in Central sales tax (CST) ceiling rate from 4 per cent to 2 per cent with effect from April 1, 2006. This is expected to be the first step towards an eventual phase out of CST under the new State-level VAT regime.

CST is a levy of tax on sales effected in the course of inter-State trade. Although CST is a Central levy, the States in which the sale originates administers the tax. CST collections during 2004-05 stood at about Rs 15,500 crore.

The VAT panel's agreement for a cut in the CST ceiling rate from April 1 next year has come on the back of concurrence of the Union Finance Ministry to provide 100 per cent compensation of losses suffered by States on account of the phase out of CST, according to the VAT panel Chairman, Dr Asim Dasgupta. However, there was still no definite decision or agreement on the mode in which the States would be compensated for the losses.

The Empowered Committee had in its January 2005 White Paper on VAT underscored the need for phasing out CST after the introduction of new tax regime. It had also stressed the need for putting in place a tax information exchange system (TINXYS) while the CST is phased out.

Further, the White Paper had mentioned that the Empowered Committee of State Finance Ministers on VAT would review the position regarding CST during 2005-06 and that suitable decision on the phasing out would be taken.

Meanwhile, the Empowered Committee today announced the pilot launch of online TINXSYS portal (www.TINXSYS.com) to gather business intelligence on inter-State trade of goods.

This portal would interlink commercial tax departments of all States. In its present pilot launch, the portal would allow verification of dealer Tax Identification Number (TIN) and CST number in respect of 10 States.

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