Government seeks Parliament nod for Rs 11,000 crore CST compensation to states

NEW DELHI: Government today sought approval of Parliament to release about Rs 11,000 crore to states and union territories to compensate them for revenue loss on account of phasing out of Central Sales Tax ( CST).

Moving the second Supplementary Demands for Grants in both houses of Parliament, Finance Minister Arun Jaitley sought sanction to spend an additional Rs 36,952.86 crore to meet the expenditure.

Of this Rs 10,998.97 is for CST compensation to states/UTs and Rs 4 crore for meeting VAT related expenditure.

Jaitley sought Parliament's nod for "providing additional funds towards CST compensation to the state governments (Rs 10,757.41 crore) and for meeting VAT related expenditure (Rs 4 crore)".

He also sought sanction for providing additional funds towards CST compensation to Union Territory Administration amounting to Rs 241.56 crore.

As part of the roll-out of proposed Goods and Services Tax (GST) regime, the CST is being phased out and has been reduced to two per cent from the earlier four per cent. The Centre collects CST and distributes it among states.

In December 2014, government introduced the long-pending GST Bill in the Lok Sabha for roll-out of the new indirect regime from April 2016 subsuming various levies like entry tax and octroi.

CST, a tax imposed on the inter-state movement of goods, 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 Value-Added Tax (VAT). The Centre had then promised the states that it would bear losses due to reduction of CST.