Opposing the Centre’s decision to pay Central Sales Tax (CST) compensation to states for 2010-11 after deducting the revenue gains on account of increase in the floor rate of Value Added Tax(VAT) from four to five per cent , Chief Minister Naveen Pattnaik has sought the intervention of Prime Minister Manmohan Singh to reverse the move. He also disapproved the Centre’s decision not to pay CST compensation for 2011-12.
Patnaik urged that the Centre should continue to compensate for CST loss without any deduction till Goods and Services tax (GST) is introduced.
“In case this proposal is not acceptable, necessary amendments may be made in the CST Act allowing the states to collect CST at four per cent as before”, he added.
The letter read that Odisha has claimed Rs 664.39 crore as compensation for the loss on account of CST rate reduction for the year 2010-11.
The Department of Revenue, Government of India has sanctioned the state only Rs 256.37 crore.
The Centre has deducted from the claim about Rs 260 crore towards the notional gain in VAT revenue due to increase of the VAT rate.
Stating that declared goods, industrial inputs, capital goods and other essential goods are taxed at lower VAT rate, Patnaik wrote that about half of the VAT at four per cent comes from declared goods like coal, iron and steel goods, paddy, rice, pulses, cotton, ground nut, maize etc.
The Chief Minister flayed the Centre for not amending the CST Act to enable the states to increase the VAT rate on declared goods from four to five per cent in 2010-11 and said that necessary amendment of section 15 of the CST Act came into effect only after April 8, 2011.