Not impressed by the Centre’s view on Central Sales Tax (CST), the states on Saturday asked it to either compensate them adequately for their revenue loss or increase the levy to the earlier rate of four per cent.
The empowered group of state finance minister in their meeting here also finalised a negative list of 35 services which would not be taxed under the proposed Goods and Services Tax (GST) regime.
“If the government does not release compensation then the Centre should revert to the CST levy of 4 per cent from the present 2 per cent level,” Bihar deputy chief minister and finance minister Sushil Kumar Modi told reporters after the meeting of the group.
“Ninety-nine per cent of the states were of the opinion that either they should be compensated or the Centre should revert to 4 per cent rate,” he said.
At present, CST is payable on inter-state sales at two percent. Though CST is levied by the Centre, the revenue goes to the states. The Centre is trying to phase-out the CST and has promised to compensate the states for loss of revenue due to reduction in the CST rate to two percent from four per cent earlier.
CST phaseout is part of the introduction of the new GST regime under which various levies like excise, service tax and states tax, value-added tax, entry tax and purchase tax would be subsumed in a single tax.
The states expressed their resentment in the meeting after the Union finance ministry refused to compensate them for loss of revenue on account of reduction in CST rate from 2010-11 onwards.
While the states have demanded a compensation of Rs19,060 crores for 2010-11, the Centre said it has released Rs6,393 crores.