Process for CST cut to be delayed

The notification for reduction of central sales tax from 4 per cent to 2 per cent is likely to be delayed further.

The notification, expected by April-end, will take time as all the states need to implement value-added tax before the CST reduction can come into force, according to advisor to the finance minister, Parthasarthy Shome.

"States staying out of VAT complicate the matter. The state governments have to come on board and implement VAT. We need a consensus," Shome said at the launch of the Assocham-KPMG report on the implementation of VAT.

Uttar Pradesh and Tamil Nadu have not yet implemented VAT. Shome said the Centre could reduce central sales tax but as state governments were represented in the empowered committee and were part of the process, it would take time. The stakeholders were also trying to resolve the issue of compensation, he added.

"The pace of the reduction of CST depends on the compensation the states will get. We are still working out monetary and non-monetary ways to compensate them," Shome said. For VAT implementation, the compensation given to the states in the first year stood at Rs 3,000 crore.

"This is an extraordinary feat as compensation paid for the projected revenue loss is for the best three years during the last five years," Shome said.

Issues of uniform classification of goods and services and a proper information system to enable states to give input credit to traders were some of the other issues that Shome raised before the proposed goods and services tax could be implemented.