States to get Rs.11,000 crore this fiscal for sales tax cut

The states will receive Rs.11,000 crore this fiscal towards partial compensation of the losses suffered by them for reduction in central sales tax (CST), Finance Minister Arun Jaitley said Wednesday.

Observing that there has been a "trust deficit" with the states on this count delaying the proposed rollout of the Goods and Services Tax (GST), Jaitley told the Lok Sabha in his reply to the discussion on the first batch of supplementary demands for grants for 2014-15 that "I stand by my commitment made to the states in July this year. We will pay Rs.11,000 crore this year itself".

"I hope my revenues will grow to help me afford this payout by March 2015," he added.

Jaitley had earlier told parliament that he has already assured states that he would clear their compensation dues of about Rs.34,000 crore ($5.5 billion) over a three-year period. The amount promised Wednesday is about a third of the outstanding CST compensation dues.

Jaitley will meet Finance Ministers of all states here Thursday towards building consensus with the states on implementing GST from April 1, 2016.

There has been broad agreement with the states on most issues related to GST, Jaitley added

The previous United Progressive Alliance (UPA) government had in 2011 introduced a Constitution Amendment Bill in the Lok Sabha towards the introduction of the GST. States sought a five-year compensation package and asked for its inclusion in the bill.

The Lok Sabha later passed the first batch of supplementary demands for grants that involve additional expenditure of Rs.12,500 crore, but an actual outgo of only Rs.500 crore.

Jaitley said these proposals include 54 grants under various departments involving a net cash outgo aggregating to over Rs.500 crore.