The Centre has resolved the issue of CST compensation with the states. The centre agreed for a lower payment of 34,000 crore rupees for phasing out the Central Sales Tax. It paved way for implementation of the Goods and Services Tax (GST).

This was stated by the Deputy Chief Minister and Finance Minister of Bihar, Sushil Kumar Modi, who chaired the meeting of State Finance Ministers at Bhubaneshwar yesterday. He said, the Centre has agreed to pay this compensation amount to the states.

As per the resolution at the meeting, the Centre would bear 100 per cent of the loss accrued to states in 2010-11 fiscal on account of lowering of CST. However, for 2011-12 and 2012-13 fiscal, the Centre would give 75 per cent and 50 per cent of the losses to the states.

CST, a tax imposed on the inter-state movement of goods,was reduced from 4 per cent to 3 per cent in 2007-08 and
further to 2 per cent in 2008-09 after the introduction of Value-Added Tax (VAT).

The committee set up by Finance Minister P Chidambaram to resolve the CST issue had suggested that the payment of Rs 34,000 crore be made to the states towards losses on accountof phasing out of CST.