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After Mamata, now Jaya flays Centre over CST

I would like to point out that the action of Government of India in linking CST compensation with additional revenue on account of VAT rate revision is unilateral, arbitrary and untenable. There is no link between CST rate reduction and VAT rate enhancement. It was never a part of guidelines for CST compensation. — J Jayalalithaa, Tamil Nadu CM

Chennai, April 14
Joining her West Bengal counterpart Mamata Banerjee, Tamil Nadu Chief Minister J Jayalalithaa today attacked the Centre for its "arbitrary" action in reducing Central Sales Tax (CST) compensation to states by linking it with VAT rate revision.

Though the Centre had agreed to compensate states for the revenue loss for 2010-11 also, the eligible compensation was "arbitrarily restricted" by deducting additional revenue realised through revision of VAT rate from four to five per cent, she said in a letter to Prime Minister Manmohan Singh.

"I would like to point out that the action of the Government of India in linking CST compensation with the additional revenue on account of VAT rate revision is unilateral, arbitrary and untenable. There is no link between CST rate reduction and VAT rate enhancement. It was never a part of the guidelines for CST compensation," she said.

Banerjee had shot off a letter to Singh on Wednesday protesting the Centre's "unilateral decision" not to pay CST compensation to states for 2011-12. The decision to stop CST compensation for 2011-12 "is equally objectionable", Jayalalithaa said, adding the CST rate was reduced only as a precursor to introduction of Goods and Service Tax (GST).

"Since it is Government of India's responsibility to introduce GST by evolving a consensus and by putting in place appropriate mechanisms, states cannot be expected to bear the loss on account of its failure to introduce GST. Government of India has a moral responsibility to compensate the States till GST is introduced," she said.

Non-implementation of GST from April 1, 2010, should not be taken as ground to stop CST compensation and the Centre has to provide compensation till GST is introduced as revenue loss suffered by states is substantial and permanent, she said. Drawing Singh's attention to compensating states for revenue loss due to reduction of CST rate for 2010-11 and subsequent years, she said the Chairman of the Empowered Committee of State Finance Ministers had already conveyed the objections of state governments, including Tamil Nadu. — PTI