New Delhi: States today asked Prime Minister Manmohan Singh to resolve the CST compensation issue by 7 August so that there is no “trust deficit” before introducing GST, dubbed as a big-ticket tax reform.
“States are angry, they are agitated. We have urged the prime minister to resolve the issue by 7 August. There are about 20 days and we hope he (Singh) will resolve the issue,” the chairman of Empowered Committee of State Finance Ministers, Sushil Kumar Modi, told reporters in New Delhi.
The committee, which met here, has sought meeting with the prime minister.
States got only Rs 6,393 crore as compensation for reduction in Central Sales Tax (CST) rate from the Centre in 2010-11 against the demand of about Rs 19,000 crore. They have been told by the Centre there would be no more compensation.
Modi said states are suffering losses due after reduction in CST rate to 2 percent from 4 percent and should be compensated as promised by the Union government.
“If there is trust deficit at the beginning of GST, then how the states will rely on central government that it will compensate states when GST will be implemented,” he said, adding that “if CST compensation issue is not resolved there would be difficulties in implementation of GST”.
West Bengal Finance Minister Amit Mitra said it was the time for the Centre to keep its commitment on compensation and states should be compensated for revenue loss on CST reduction till GST is implemented.
“All the states are on the same page. CST issue must be settled,” he said.
Earlier, Modi had written a letter to Singh, who also holds the finance portfolio, saying state governments would be forced to adopt certain tax measures which may not be in the interest of tax reforms.
When asked about next course of action if the issue is not settled by 7 August, Modi said, “Executive Council will meet and decide”.