New Delhi Aug 19 (IANS) With state finance ministers having dropped the issue of compensation in lieu of a cut in the central sales tax from the agenda of their upcoming meeting on implementing the Goods and Services Tax (GST), the major hurdle appears to have cleared in reforming India’s indirect tax regime. In line with the BJP’s position on the GST as facilitating industrial growth, Finance Minister Arun Jaitley had told the states that their concerns over its design and issues related to compensation for revenue loss on account of rolling out GST and phasing out the central sales tax (CST) regime would be suitably addressed. While CST is levied by the centre on inter-state movement of goods but is collected by the states, the issue of compensation arose because the centre cut CST from four percent to two percent in phases after state-level value added tax (VAT) was introduced from April 1, 2005. “States are likely to lose substantial revenues in the new regime,” Madhya Pradesh Chief Minister Shivraj Chouhan wrote in a letter to Jaitley, adding that states’ experience in receiving compensation for CST losses in the past was not very satisfactory.
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