CST compensation partly before Budget

Dated 9th December, 2014

The Centre is planning to give “a portion” of the central sales tax (CST) compensation to states before the upcoming Budget, even as it gears up to introduce the Constitution (Amendment) Bill, 2014, for implementing the proposed goods and services tax (GST) in the ongoing Winter session.

A senior official, who refused to be quoted, said that in its attempt to garner the support of states for rolling out the indirect tax reform, the ambitious GST, the Centre is willing to give states their pending compensation for phasing out CST. The Centre has to pay Rs 34,000 crore which has accumulated since 2011.

A portion of the CST compensation to the state will be given to them in this fiscal year before the Budget,” the official said adding that it will increase the trust between the Centre and states and will iron out a few kinks for introducing the GST from 2016.

Finance minister Arun Jaitley is slated to meet state finance ministers later this week where he is expected to make this announcement. The UPA government had made it clear that the CST compensation would be paid only when there was some “light at the end of tunnel (regarding GST implementation)”. CST is levied on goods in inter-state trade.

As a prelude to GST introduction, it was decided to phase out CST over a period of three years ending 2008-09 on the assumption that GST would be introduced from April 1, 2010. The Centre had agreed to pay for the revenue lost on account of phasing out the CST. However, having missed the deadline for GST implementation, the CST continues to be levied at 2 per cent.

The government on Monday decided to form an inter-ministerial group between the ministries of civil aviation and tourism and culture. The group, to be headed by the tourism secretary, aims at promoting tourism together with aviation and railways. The government is also keen on bridging the gap between the ministries and the tour operators to work better towards promotion of tourism. A meeting was held on Monday between civil aviation minister Ashok Gajapathi Raju and tourism minister Mahesh Sharma, as well as the secretaries and joint secretaries.