| "We earlier intended to reduce the CST rate from 4 per cent to 3 per cent from October 1 and to 2 per cent from April 1, 2007. Since the plan has been delayed by six months, we will reduce the rate directly to 2 per cent so that the reduction plan remains unchanged. We will review the phasing out of CST at the end of the next fiscal," Asim Dasgupta, chairman of the empowered committee of state finance ministers on value added tax, said. |
| Dasgupta added the CST phase-out would, however, be contingent on the states and the finance ministry agreeing on the compensation package for losses on account of the reduction in CST rates. |
| He said the states estimated that the revenue from CST this fiscal would be around Rs 20,000 crore. |
| Officials said a crucial meeting of the empowered committee would be held in the first week of October to work out a revised compensation package. |
| "States have been asked to give their suggestions to an increased share of total tax proceeds to 50 per cent from the present 30.5 per cent or consider a list of services which can be transferred to the states along with increased share from overall tax proceeds or alternatively consider if all the services can be transferred to the states. The views of the states will be reconciled at the next committee meeting," he added. |
| States and the finance ministry have so far been unable to reach and agreement on the nature and quantum of compensation for phasing out of the CST. |
| While the states were keen to obtain an increased share of 50 per cent of the total tax proceeds, the Centre had suggested an increase in the VAT rates from 4 per cent to 5 per cent. The Centre had also offered a list of 77 intra-state services to the states. |
| Dasgupta said the growth rate for VAT of the 27 implementing states up to August was 26 per cent. |
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