The empowered committee of State Finance Ministers has decided to propose a reduction in the central sales tax (CST) from the existing three per cent to two per cent.
This is a step towards the introduction of Goods and Services Tax (GST) from 2010-2011 by phasing out CST, value-added tax and other taxes, thereby bringing in a unified tax regime encompassing both the Centre and the states. The process of phasing out CST started in 2007-08 with the rate having been reduced from four per cent to three per cent.
Briefing the newspersons on the decisions taken by the meeting of the empowered committee held here on Monday, the West Bengal Finance Minister, Mr Ashim Dasgupta, said that the abolition of CST would result in loss to some of the states like Maharashtra and the committee had worked out a formula for making good the losses to such states, which would be forwarded to the Union Finance Minister.
Mr Dasgupta said that the meeting reviewed the revenue performance of the State Governments in 2007-08 and found that the VAT revenue had increased by 24 per cent. The revenue had doubled from an average growth of 12 per cent recorded during the previous sales tax regime. He said that the Union Finance Minister had entrusted the empowered committee to work out a model and a road map for the introduction of GST covering both the Centre and the state governments. The committee had completed the work and submitted the report to the Union Finance Minister last month, the response to which is expected soon. Mr. Dasgupta said that the movement of around 700 items had to be scientifically recorded for correct assessment of CST and the committee had decided to put in place a computerised network of taxation information exchanges for the purpose. The committee decided to bring in a harmonised system of classification for commodities. The Centre for Taxation Studies in Thiruvananthapuram had done a study and recommended a system of common nomenclature for the commodities, which the committee has accepted in principle.