Question : COMPENSATION FOR CST LOSS

(a) whether Government has finalized the compensation package to the States for loss of Central Sales Tax (CST) revenue for the year 2010-11 and if so, the details thereof and compensation released, State-wise so far along with the guidelines followed in releasing the compensation;

(b) whether the claim of CST compensation has been reduced to those States which have raised the VAT rate from 4% to 5% and if so, the logic behind it; and

(c) whether the Empowered Committees has recommended to the Government not to link the release of CST compensation with the increase in revenue due to increase in the rate of VAT from 4% to 5% and if so, the response of the Government thereto?

MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRIMATI NIRMALA SITHARAMAN)

(a) Madam, States have been paid total amount of Rs. 6393.94 crore Central Sales Tax compensation for the year 2010-11 by reducing the revenue gain due to increase in VAT rate from 4% to 5% as per details given in Annexure I . Central Sales Tax compensation has been released in terms of CST guideline dated 22.08.2008 (Annexure II) and as per Cabinet decision dated 11.2.2011 in this regard.

(b) Yes, Madam. The claim of CST compensation has been reduced by taking into account revenue gain to the States due to increase in VAT rate from 4% to 5%.

(c) Yes, Madam. Empowered Committee recommendation in this regard is under consideration with the Department of Revenue.