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The Centre has agreed to fully compensate states for the losses they suffered due to reduction in central sales tax (CST) estimated at Rs 14,000 crore in 2010-11, chairman of Empowered Committee of State Finance Ministers Mr Asim Dasgupta said here on Friday.
The State finance ministers met Union Finance Minister Mr Pranab Mukherjee here to discuss the GST rollout.
“Mr Mukherjee said that he is willing to make full compensation for CST loss this fiscal. To begin with it would be an hoc relief to be followed by subsequent measures,” Mr Dasgupta told reporters after the meeting.
Yesterday, the Government had approved Rs 7,029 crore compensation to states for CST loss in 2010-11. Of this Rs 3,000 crore is likely to be released this fiscal.
Once the proposed Goods and Services Tax (GST) is rolled out, other existing indirect taxes, including the CST, would be subsumed into it.
CST, a tax on movement of goods from one state to another, 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 VAT, as it was considered distortionary.
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