CST compensation: Centre to release Rs 11,000 cr in FY15 to states - Jaitley

Finance Minister Arun Jaitley said on Wednesday, a day before a crucial meeting with state finance ministers on the proposed Goods and Services Tax (GST), that the ministry would release Rs 11,000 crore to states towards Central Sales Tax (CST) in FY15.

"Despite a difficult and challenging (fiscal) situation, I propose to release about Rs 11,000 crore, a third (of the total CST compensation of Rs 34,000 crore sought by states), this year as part-payment of CST compensation to the states. This will take care of the amounts from 2010-11 onwards. The balance of the amount, I will start paying from the next financial year onwards," Jaitley said, while replying to the debate on the Supplementary Demand for Grants for 2014-15. The Lok Sabha passed the supplementary demands for an additional expenditure of Rs 12,500 crore. However, the actual cash outgo would be Rs 500 crore. The government is working towards rolling out GST from April 1, 2016, and is in discussion with states to insulate their revenues from the impact of GST. GST will subsume indirect taxes such as excise duty and service tax at the central level and value-added tax (VAT) and local levies on the states' front.

Although the Centre seems firm on its decision to subsume petroleum and entry taxes in GST, with a provision for first tranche of CST compensation, Jaitley is likely to assure the states on Thursday's meeting that the government will compensate them for three years' losses under GST as well, even though there is no provision for that in the Constitution.

"A major impediment in the implementation of the GST has been the trust deficit between the states and the Centre. One of the major reasons for the trust deficit is non-payment of the CST compensation to the states, from the year 2010 onwards. In my meeting with the empowered committee of the state finance ministers in July 2014, I had committed that partial payment of outstanding CST compensation will be released this year. I stand by this commitment given by me," said Jaitley.

Speaking on the Centre's growth forecasts, Jaitley said there were challenges but hoped it would be within the projected range of 5.4-5.9 per cent in 2014-15 and cross six per cent in the next financial year. He also said he was "determined to maintain" fiscal deficit at 4.1 per cent of the gross domestic product.

"Don't underestimate the challenges I have… If we don't maintain that figure, the world and the global investors look at us, our ratings depend on that, and a lot depends on how the world views you," he said, adding that economic growth falling to below-five per cent levels in 2012-13 and 2013-14 had an impact on revenue collection, fiscal deficit, and government's expenditure on developmental works.

FINANCE MINISTER'S TAKE ON ISSUES

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• LPG SUBSIDY: Poor entitled to subsidies, not rich. Leakages will be plugged
   
• DISINVESTMENT: Easy to oppose the idea but what do we do with loss-making units?
   
• PLANNING COMMISSION: Govt stands by cooperative federalism; all CMs, including the Congress ones, favoured dismantling the Plan panel
  

 

INSURANCE: Large investments waiting to come in the sector