• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

K.R. Srivats

New Delhi, June 8

Compensation for revenue loss to the States on account of central sales tax (CST) reduction continues to be a thorny issue even as the Centre recently cut the ceiling rate from 3 to 2 per cent with effect from June 1.

Official sources said that the CST compensation issue would come up for discussion at the forthcoming VAT panel meeting on June 16. Although the Centre and States had recently agreed on an “upper limit” for compensation on CST reduction, there was still no clarity on whether this would be applicable for claim settlements in respect of 2007-08 or only in the case of 2008-09 and subsequent years.

“We are now getting revenue loss compensation claims for CST reduction in 2007-08. The issue is whether the upper limit agreed recently will apply for 2007-08 related claims or not. We will ask (the) empowered committee to give its view on this,” official sources said.

Prior to notification of the CST rate of 2 per cent in the last week of May, the Centre and the empowered committee had agreed that the compensation for revenue loss will be limited to the proportionate loss based on the actual collection of CST in the relevant year. Some of the States are still not clear about the implication of the move to agree on an “upper limit” or ceiling for compensation.

It is learnt that the Centre and the committee have reached an understanding that States would not be “prevailed upon” to impose VAT on textiles. The idea of increasing the general VAT rate from 4 to 5 per cent within financial year 2008-09 may also not be pursued, official sources said.

The Centre was keen that States increase the general VAT rate from 4 to 5 per cent and count additional revenues as part of the CST compensation. Last year, the States had agreed for this, but are now not keen to count this as part of CST compensation and also not pursue such a proposal.

Meanwhile, the Union Finance Ministry has asked the State Governments to provide details (including data) of the revenues earned by them from sales tax and other taxes on petroleum products. States’ revenues from petrol, diesel and other oil-related products are estimated to be about Rs 60,000 crore every year.

More Stories on : Taxation | States | Petroleum

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Build a dream, not a nightmare

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line