Odisha may get Rs 1,000 cr compensation for CST loss

Last Updated: Mon, Jan 28, 2013 20:10 hrs


With the Centre giving its consent to compensate revenue loss suffered by states due to pruning of Central Sales Tax (CST) rate from four per cent to two per cent, Odisha is expecting a compensation of Rs 1,000 crore.


“Due to slashing of CST rate from four per cent to two per cent, we have accumulated loss of Rs 1,500 crore in the past three years. As the Centre has decided to compensate the losses of states, we stand to get Rs 1,000 crore,” said a state finance department source after the meeting of the empowered committee of state finance ministers held here.

In 2011-12 alone, Odisha had suffered a loss of Rs 800 crore.

At the recent pre-Budget meeting convened by Union finance minister P Chidambaram with state finance ministers, Odisha finance minister Prasanna Acharya had raised the issue of CST compensation, citing swelling revenue losses of the state.

States that had piled up losses of Rs 34,000 crore owing to reduction in CST rate, have been vehemently demanding for compensation. The Centre has decided to give full compensation to states for 2010-11, 75 per cent and 50 per cent for 2011-12 and 2012-13 respectively. The overall compensation for all state governments was worked out at Rs 15,000 crore for 2011-12. But the Government of India in April 2012, had decided against doling out any compensation amid global macroeconomic uncertainties and also lower growth projections for domestic GDP growth.

Similarly, of the total CST loss to the tune of Rs 12,000 crore incurred by all states in 2010-11, the Centre has disbursed only Rs 6,394 crore. It had also categorically stated then that the matter is settled for 2010-11 and the left over loss of states that have not raised base VAT (value added tax) from four to five per cent will not be compensated.

More from Sify: