CST abolition?
As per provisions of the Constitution, the Central Sales Tax (CST) is levied by the Central Government by virtue of entry 92A of the Union List, but the same is assigned to the States within which the tax is leviable, as per provisions of article 269 of the Constitution of India. Thus, the State Governments benefit from the CST.
The Central Sales Tax, being an origin-based tax, is inconsistent with the concept of VAT and needs to be phased out. The abolition of CST will result in revenue loss to the States. At this stage, it is not feasible to estimate revenue loss to each State due to abolition of CST. However, as per provisional figures furnished by the States, total CST collection during 2004-05 was around Rs.15,100 crores. The Empowered Committee of State Finance Ministers (EC) is presently deliberating upon the issue of phasing out of the CST and is expected to make a recommendation to the Central Government. The EC is deliberating upon the various options for compensating the revenue loss on account of phasing out of CST including giving the States larger share/powers in respect of taxation of services. Once the EC finalizes its recommendations, the Central Government will take a view in this matter.
This information was given by Shri S.S. Palanimanickam, Minister of State for Finance in reply to a question raised by Shri Datta Meghe in Rajya Sabha yesterday.