The Hindu Business Line : Chidambaram, VAT panel chief discuss compensation package

The compensation package for proposed Central sales tax (CST) phase out is understood to have come in for detailed discussion at the meeting between the Finance Minister, Mr P. Chidambaram, and the Chairman of the Empowered Committee of State Finance Ministers on VAT, Dr Asim Dasgupta, here on Friday.This meeting assumes significance as State Finance Ministers are to meet here on Saturday under the aegis of the VAT panel to review collections and discuss issues relating to deviations from agreed value added tax (VAT) rates.

The State Finance Ministers are also expected to review on Saturday the status of implementation of the TINXSYS project.

"There is very little I can share with you today. I will first have to discuss the views conveyed by the Finance Minister with the State Finance Ministers tomorrow," Dr Dasgupta told reporters at North Block after an hour long meeting with Mr Chidambaram.

Dr Dasgupta said that he had come to North Block to meet the Union Finance Minister, as the Empowered Committee was keen to have inputs from the Finance Ministry on certain issues.

The VAT Panel had already submitted to the Union Finance Minister a report of the technical committee that spelt out the compensation package that States were looking forward to for phase out of CST.

A higher devolution of service tax collections, powers to levy and collect service tax on about 68 services, entire proceeds of VAT on imports and powers to levy VAT on three additional excise duty (AED) items formed part of the compensation package that States have sought from the Centre for phase out of CST.

Annual CST collections during 2005-06 stood at about Rs 18,000 crore, which the States collect and retain.

The VAT panel had earlier agreed for reduction in CST rate from 4 per cent to 3 per cent from October 1 so long as the Centre agrees to the compensation package suggested by it.