Orissa has voiced its opposition to the Central government's decision to phase out compensation given to states against Central Sales Tax (CST) loss from 2011-12.
With the fate of the much touted Goods & Service Tax (GST) still hanging in the balance, the state government has demanded that CST rate may be reverted to the original four per cent instead of the current rate of two per cent so that states do not lose out on revenue substantially.
“At the recent meet of the empowered committee of state finance ministers on GST roll out, we have opposed the Centre's decision to phase out compensation for states’ loss against CST. We have demanded that the CST rate may be reverted to four per cent,” a senior finance department official told Business Standard.
The overall compensation for all state governments was worked out at Rs 15,000 crore for 2011-12. With economic growth projections on the downside amid global macroeconomic uncertainties, the Centre is not keen on straining its resources by doling out compensation to states. Of the total CST loss to the tune of Rs 12,000 crore incurred by all states, the Centre has disbursed only Rs 6,394 crore. It has also categorically stated that the matter is settled for 2010-11 and the left over loss of states that have not raised base VAT (value added tax) from four per cent to five per cent will not be compensated. For 2009-10, the Government of India (GoI) had decided to compensate 68 per cent of the loss. The GoI's reluctance to offer full compensation is understood to have caused much heartburn among the states. The Orissa government is also peeved over pending Rs 260 crore loss against CST for 2010-11 which the Centre was supposed to compensate. It may be noted that that Orissa had claimed Rs 380.17 crore as compensation towards loss on account of CST reduction for 2007-08 of which the GOI had sanctioned Rs 137.02 crore. Similarly, for 2008-09, the GoI had sanctioned Rs 425.40 crore as against a compensation claim of Rs 483.29 crore by the Orissa government.