Jayalalithaa attacks reduction in tax compensation

CHENNAI: Joining her West Bengal counterpart Mamata Banerjee, Tamil Nadu chief minister J Jayalalithaa on Saturday criticised the Centre for its “arbitrary” action in reducing Central Sales Tax (CST) compensation to states by linking it with VAT rate revision.

Though the Centre had agreed to compensate states for the revenue loss for 2010-11 also, the eligible compensation was “arbitrarily restricted” by deducting additional revenue realised through revision of VAT rate from four to 5%, she said in a letter to Prime Minister Manmohan Singh.

“...the action in linking CST compensation with the additional revenue on account of VAT rate revision is unilateral, arbitrary and untenable. There is no link between CST rate reduction and VAT rate enhancement,” she said.