Mobile phones and tablets could become cheaper if states accept the telecom department's proposal to define these as goods of special importance, under the Central Sales Tax (CST) Act.The Empowered Committee (EC) of State Finance Ministers would consider bringing mobile phones and tablets under the declared goods category at its next meeting, in Mussoorie on May 10-11. Industry associations and representatives from the Department of Telecom would make a presentation to the EC on May 11.

The government today said it has released Rs 6,394 crore towards compensation for losses incurred by states due to reduction in Central Sales Tax (CST) revenue in 2010-11 in view of a new indirect taxes regime that is to be implemented.The compensation has been released to 13 states.The government had set up a committee with state representatives to resolve the issues pertaining to Goods and Services Tax (GST)."The Committee proposed for the payment of 100% CST compensation for the years 2010-11, 75% for 2011-12 and 50% for 2012-13 to be worked out," Minister of State for Finance S S Palanimanickam said in a written reply to the Lok Sabha.

Haryana Minister for Excise and Taxation, Kiran Choudhry has demanded full compensation of Central Sales Tax (CST) claims of Haryana.
Speaking at the meeting of the Empowered Committee of Finance Ministers of States in New Delhi on Friday, Choudhry said the claims of CST compensation of Haryana have been drastically cut. Against the compensation claim of Rs 6639.91 crore for the years 2007-08 to 2010-11, Haryana has been given only Rs 4105.16 crore. For the year 2010-11, compensation of only Rs 1136.16 crore was given against the claim of Rs 2624.68 crore, and no compensation has been given for the year 2011-12, against the claim of Rs 1353.88 crore. The meeting was presided over by Sushil Kumar Modi, chairman of the Empowered Committee.

The consultative committee on goods and services tax (GST), comprising MPs from both the Houses of Parliament, on Friday considered whether the revenue loss to state governments from reduced central sales tax be settled “to the satisfaction of all states” before moving ahead with the GST. States had said last month that if the delay in CST compensation was not resolved, it would pose hurdles to the implementation of the proposed GST. Finance minister P Chidambaram said that he was hopeful of getting the GST Bill passed before the end of the current financial year, which would usher in a more effective and efficient substitute for a plethora of indirect taxes.

The Centre and states will attempt to break the logjam over the compensation for reduction in central sales tax (CST), an issue that is threatening to derail the United Progressive Alliance government's ambitious indirect tax reform of goods and services tax. Finance Minister Pranab Mukherjee will meet Sushil Modi, Bihar deputy chief minister and chairman of empowered committee of state finance ministers, on April 17 to thrash out the contentious issue. "The issue of CST compensation will be on the agenda," said a government official. States and the Centre had reached a deal in 2006 to cut CST, levied on inter-state sale of goods, by 1% every year beginning April 1, 2007 and eliminate it by April 1, 2010 to coincide with launch of GST. The centre was to compensate the states for the loss on revenue on account CST phase out. A delay in implementation of GST due to lack of support from the states over the issue of its structure and the global financial crisis prompted a pause in the phase-out plan. State governments are upset with provision of mere 300 crore as compensation towards CST in the budget 2012-13 as against their overall demand of over 19,000 crore. They have demanded that the Centre should either pay the compensation or restore the rate of tax to original level of 4%.

The state governments that have claimed a financial package from the Centre for loss in their revenues because of the reduction of CST rates from 4% to 2% is a motley crowd, comprising both states ruled by the Congress and its alliance partners, as also their political adversaries. With the Union government claiming that it had already made the "final settlement'' for the year 2010-11 after releasing an amount of 6,393.94 crore as compensation package to the states to recompense them for their revenue-deficit owing to the reduction in CST rates, the states are now crying foul. And it is not just the Opposition-ruled states which are feeling the pinch. Among the states which have raised a hefty compensation package for the year 2010-11 are also those administered by the Congress and its coalition partners.

State finance ministers are likely to press for immediate release of Central Sales Tax (CST) compensation during their pre-Budget consultations with the Finance Minister, Mr Pranab Mukherjee, tomorrow. “We will discuss the issue of CST compensation in our meeting with the Finance Minister tomorrow,” the Bihar Deputy Chief Minister, Mr Sushil Kumar Modi, who heads a panel of state finance ministers on GST, told PTI. Mr Pranab Mukherjee is holding pre-Budget consultations with various stakeholders, including the finance ministers of states and Union Territories, in the run up to the Union Budget for 2012-13. The Empowered Committee of State Finance Ministers on Goods and Services Tax (GST) has already deliberated on the issue of CST in their meetings.

The government has asked all the states to file their compensation claims for the last fiscal on account of reduction in Central Sales Tax (CST). "States have been asked to send claims for the full financial year 2010-11 and the revenue collection figures duly certified by the Accountant General to enable settlement of claims for the full financial year," Minister of State for Finance SS Palanimanickam said in a written reply to the Rajya Sabha. The minister said the release of compensation to states for their loss of CST revenue for the year 2010-11 had already started. "An amount of Rs 2,411 crore has been released to 10 States for loss of CST revenue in financial year 2010-11," he added. CST, a tax on movement of goods from one state to another, was reduced from 4% to 3% in 2007-08 and further to 2% in 2008-09 after the introduction of VAT.

The Chairman of Empowered Committee of State Finance Ministers, Asim Dasgupta, has said the government has agreed to fully compensate states for the losses that they have suffered due to a reduction in central sales tax (CST), estimated at Rs 14,000 crore in 2010-11. State finance ministers met Union Finance Minister Pranab Mukherjee here to discuss the GST rollout. "There are two major issues which we had discussed among ourselves in the empowered committee meeting today. We discussed these issues with the union Finance Minister as well," Dasgupta told reporters after meeting. "Firstly we discussed on the latest draft of the constitutional amendment for GST. Second one is the CST rate reduction related loss compensation for the states," he added.
The consensus for a Constitution Amendment Bill among states could not be reached even after Finance Minister Pranab Mukherjee agreed to fully compensate states' losses suffered due to a reduction in the rate of the central sales tax (CST).

The Centre will pay 7,029 crore as compensation to states for the losses they suffered in 2010-11 due to a reduction in the central sales tax rate, a move seen as an attempt to break the impasse over the proposed goods and services tax ahead of the meeting of the empowered committee of state finance ministers on Friday. States had made a strong pitch for a full compensation for CST phaseout in 2010-11. "The financial implication of this proposal is estimated at approximately 7,029 crore," Information and Broadcasting Minister Ambika Soni told reporters after a Cabinet meeting. CST, a tax on sale of goods from one state to another, was reduced from 4 % to 3% in 2007-08 and further to 2% in 2008-09.