States to get Rs 11,000 crore for cut in CST to bridge trust deficit

Finance min­is­ter Arun Jait­ley has announced the release of Rs 11,000 crore to states as com­pen­sa­tion for the reduc­tion in cen­tral sales tax to bridge the “trust deficit” between the Cen­tre and the states and get them to sup­port the pro­posed goods and ser­vices tax (GST). One of the major rea­sons for this trust deficit is non-pay­ment of the CST (cen­tral sales tax) com­pen­sa­tion to the states from 2010 onwards… Despite a dif­fi­cult and chal­leng­ing sit­u­a­tion, I pro­pose to release about Rs 11,000 crore, which is one-third this year, as part pay­ment of CST com­pen­sa­tion to the states.

Jait­ley said this will take care of the amount from 2010-11 onwards and the bal­ance amount would be giv­en from the next finan­cial year, seek­ing the sup­port of the house on the cru­cial indi­rect tax reform. “GST is not an issue on which we are divid­ed on par­ti­san lines. Most state gov­ern­ments are going to benefit.

The rev­enues are going to improve as far as the Cen­tre is con­cerned, states are con­cerned and I wish to assure this House with this com­mit­ment,” the finance min­is­ter said. The sup­ple­men­tary demands amount to addi­tion­al expen­di­ture of more than Rs 12,500 crore. How­ev­er, the actu­al cash out­go would be Rs 500 crore. The demand was lat­er passed by the House.While jus­ti­fy­ing the diffi­need for a “civilised” tax regime, Jait­ley took a dig at the pre­vi­ous gov­ern­ment say­ing an “ultra-aggres­sive tax pol­i­cy” has not helped in get­ting any addi­tion­al revenue.He said ret­ro­spec­tive tax changes by the pre­vi­ous Unit­ed Pro­gres­sive Alliance gov­ern­ment had only brought a “bad name” to India rather than gar­ner any addi­tion­al revenue.