CST row may dominate empowered panel meet

Odisha lost Rs 800 crore in last two years due to CST rate reduction to 2% from 4%

The contentious issue of compensation against CST (Central Sales Tax) loss is set to dominate the two-day meet of the empowered committee of state finance ministers here on GST (Goods & Service Tax). The meet is scheduled to be held on January 28-29.

In the last meeting of the empowered committee held in Delhi in December, states had pointed out that the Centre should not prune the CST payout on the plea that some governments have benefited by raising the floor rate of VAT (value added tax) to 5% from 4%.

While most states have raised base VAT rate to 5%, some have even increased the general rate of 12.5%, also called revenue neutral rate.

“The issue of compensation against CST loss has emerged as the major bone of contention between the Centre and the states. Apart from Odisha, all other states have been vehemently demanding compensation. The issue is going to dominate the agenda at the upcoming meet of state finance ministers”, said an official source.

At a recent pre-Budget meet convened by Union finance ministry with state finance ministers, Odisha reiterated its demand for CST compensation. State finance minister Prasanna Acharya held that Odisha had lost about Rs 800 crore in last two years on account of CST rate reduction to 2% from 4%.

To settle the row, a committee was constituted with representatives from Central and state governments to address the contentious issue of CST compensation. The panel's report will be considered in the forthcoming meet of the empowered committee.

The meeting will also discuss report of another committee to evolve a consensus on design of GST. Moreover, it will review the latest position on VAT and non-VAT revenue collection by states in the April-December period of this fiscal.