Compensate CST loss fully, Orissa tells Centre

Orissa has pressed for complete compensation against Central Sales Tax (CST) loss in 2010-11 before the Centre.

The demand has been made at the meeting of the empowered committee of state finance ministers on the proposed Goods & Service Tax (GST) held on Monday at Bhopal.

“Of the total CST loss of around Rs 600 crore for 2010-11 made by the Orissa government, the Government of India has disbursed only about Rs 200 crore. We have raised the demand for full compensation,” a senior official of state finance department told Business Standard.

Of the total CST loss of Rs 12,000 crore incurred by all states, the Centre has disbursed only around Rs 3,000 crore, leaving the state governments sulking, he added.

For 2009-10, the Government of India (GOI) had decided to compensate 68 per cent of the loss.

Later, the empowered committee of state finance ministers had decided that the remaining 32 per cent should also be compensated by the GoI.

It may be noted that that Orissa had claimed Rs 380.17 crore as compensation towards loss on account of CST reduction for 2007-08 of which the GOI had sanctioned Rs 137.02 crore.

Similarly, for 2008-09, the GoI had sanctioned Rs 425.40 crore as against a compensation claim of Rs 483.29 crore by the Orissa government.

As per the guidelines for compensating loss on account of phasing out of CST issued on October 10, 2007, the actual CST revenue during 2006-07 shall be taken as the basis of actual collection for the purpose of assessing the revenue for 2007-08, 2008-09 and 2009-10 on the compounded annual growth rate (CAGR) of total CST revenue for the period from 2003-04 to 2006-07.

Later, the GoI modified the guidelines for compensating loss on account of phasing out of CST and issued revised guidelines on August 22, 2008. According to the revised guidelines, the CST loss shall be limited to the 'proportionate loss' based on actual collection over the period for which compensation is paid.

The proportionate CST revenue over the period will be calculated by extrapolating the actual CST revenue collected in that period at the actual reduced tax rate to a notional amount that would have been collected had the tax rate continued to be at four per cent.

The proportionate loss would be the difference between the proportionate CST revenue so computed and the actual CST revenue for the period under consideration.