Odisha sore over pending CST compensation

Against the state government's claim of Rs 3843 cr of CST loss from 2007 to 2013, the Centre has so far sanctioned only Rs 1303 cr

The state government is sore over mounting dues on compensation against loss due to slashing of Central Sales tax (CST) rate from four per cent to two per cent in a phased manner.

Against the state government’s claim of Rs 3,843.03 crore of CST loss from 2007-08 to 2013-14, the Centre has so far sanctioned only Rs 1,303.08 crore, according to a written reply to the state assembly by finance minister Pradeep Kumar Amat.

The minister said, the demand for compensating the state fully against CST loss has been made by Odisha from time to time at the meetings of empowered committee of the state finance ministers on GST (Goods & Service Tax) roll out.

Amat said, he had also personally met the Union finance minister Arun Jaitley, urging the latter to clear the state's dues on CST loss. The Centre has hitherto compensated Odisha towards loss in CST till the end of 2010-11.

For 2011-12 and 2012-13, the state government’s loss has been pegged at Rs 869.58 crore and Rs 1,087.67 crore respectively. In April 2007, the central government had cut the CST rate from four per cent to three per cent and later to two per cent in June 2008.

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. As per 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.