States request Jaitley for early release of CST compensation

New Delhi: Majority states in their pre-budget meeting with Finance Minister Arun Jaitley Saturday demanded the Centre should release the long pending compensation for phasing out Central Sales Tax (CST) and provide for such funds in the upcoming Budget.

They also asked the Centre to provide special assistance to the states for meeting additional burden arising out of implementation of 7th Pay Commission in their respective states and raising borrowing limit as per the recommendation of the 14th Finance Commission.

"We would urge upon the the Union Government to fully compensate the state for the CST loss through adequate provision in the Union Budget 2016-17," Pradip Kumar Amat, Finance Minister of Odisha said during the meeting held here.

Joining the chorus, Punjab, Uttar Pradesh, Assam, Telangana and West Bengal also made a similar plea.

"We request appropriate allocation in the Budget for clearing remaining CST compensation liability of all states for 2012-13 during the current financial year," S Parminder Singh Dhindsa Finance Minister of Punjab said.

The government had decided to phase out CST over a period of four years with annual reduction at the rate of 1 per cent as a move towards implementation of Goods and Services Tax.

It was decided by the Union government to compensate the state governments towards CST loss till implementation of GST.

It was reduced from 4 percent to 2 percent in phased manner from June 2008. But since 2011-12, no compensation has been received by the state and they complained they have been incurring losses due reduced CST.

While pitching for the release of the CST compensation, representative of Assam Chief Minister Tarun Gogoi said government is requested to allow for raising market borrowing within the prescribed limit without reduction.

The 14th Finance Commission had recommended that states that have maintained financial discipline should be allowed to borrow 3.5 percent (of the state's GDP), up from 3 percent.

"Since we have maintained financial discipline, the government should allow us to increase borrowing limit. This will allow us to raise Rs 3000 crore more for FY 2016," Madhya Pradesh finance minister Jayant Malaiya said.

Make legislative changes to allow higher borrowing of 3.5 percent of State GDP, Amat said.

Besides, UP Planning Commission deputy chairman N C Vajpayee said the centre should immediately compensate state on CST front.
Besides, the government should also provide special assistance to the state for meeting the burden arising out of 7th Pay Commission recommendations on state exchequer as states too have to increase salary of their employees.