Rs 9k-cr compensation paves way for GST

Puts ball in states' court, reiterates commitment to DTC

The Budget today provided a Central Sales Tax (CST) compensation of Rs 9,000 crore to the states in the hope of garnering their support for the long delayed Goods & Services Tax (GST). Finance Minister P Chidambaram, however, refrained from setting any deadline for the rollout of GST and put the ball in the states' court to take the next step towards the reform.

The finance minister said a majority of the states had agreed to the need for a Constitutional Amendment to introduce GST and the need to pass a GST law that will be drafted by the state finance ministers and the GST Council.

"I hope we can take this consensus forward in the next few months and bring to this House a draft Bill on the Constitutional amendment and a draft Bill on GST... I appeal to the state finance ministers to realise the serious intent of the government to introduce GST and come forward to work with the government and bring about a transformational change in the tax structure of the country," he said.

CST is imposed on inter-state movement of goods. Earlier, the Centre had agreed to compensation of Rs 34,000 crore for the last three years. A sub-committee of central and state government officials had recommended 100 per cent compensation to states for 2010-11 for a cut in CST from four to two per cent, 75 per cent compensation for 2011-12 and 50 per cent compensation for 2012-13.

On the Direct Taxes Code (DTC) the finance minister said work was underway. He said DTC was not intended to be an amended version of the Income-tax Act, 1961 but a new code based on the best international practices that will be compatible with the needs of a fast developing economy.

'My team in the ministry of finance is examining the recommendations and I intend to work with the Standing Committee and its Chairman in order to finalise the official amendments. I shall endeavour to bring the Bill back to this House before the end of the Budget Session," he said.