Notification reducing Central Sales Tax to 2%

After much confusion, the Government has finally issued the notification bringing into effect from June 1, 2008 the new reduced rate of CST of 2 per cent on inter-State sales of goods against C-Form. The copy of notification is attached herewith for your records.

Government of India

Ministry of Finance

(Department of Finance)

New Delhi,Dated: May 30,2008

NOTIFICATION

S.O...(E) In exercise of the powers of conferred by the proviso to the subsection (1) of section of the Central Sales Tax Act 1956 (74 of 1956), the Central Government herby reduced the rate of tax as specified in sub-section (1) of section 8 of the said Act from three per cent to two per cent with effect from 1st June, 2008.

[No.1/2008-CST-F.No.28/11/2007-ST]

(R.G.Chabbra)

Undersecretary to Government. of India

Finance Ministry Notification that was withdrawn

On the basis of the discussions between the Empowered Committee (EC) of State Finance Ministers and the Union Finance Minister regarding the compensation package, the Government of India, Ministry of Finance, Department of Revenue has issued a notification on 30th May, 2008 to bring into effect from 1st June, 2008 the new reduced rate of CST of 2 per cent on inter-State sales of goods. The notification of new CST rate of 2 per cent in place of earlier 3 per cent is in accordance with the announcement made by the Union Finance Minister in his budget speech in Parliament in February 2008 that the rate of Central Sales Tax would be reduced.
The rate of CST on inter-State sale of goods to registered dealers (against Form-C) shall now be the lower of 2 per cent and the rate of VAT or State Sales Tax applicable. This reduction forms a part of the roadmap for phasing out CST completely by 31st March, 2010 in preparation of introducing Goods & Services Tax (GST), the roadmap for which is being worked out by the EC of State Finance Ministers together with the Union Finance Ministry.
The Central Government and the Empowered Committee of State Finance Ministers have further agreed that the compensation for revenue loss to the States in any year arising from the lowering of CST will be limited to the proportionate loss based on the actual collection of CST in the relevant year.
BSC/vk/134/08

Government withdraws statement on CST cut to 2 per cent news

The government has withdrawn a statement about cut in central sales tax rate on inter-state sales from three per cent to two per cent, effective 1 June. The statement was withdrawn shortly after release.
"The press release on Central Sales Tax reduced to two per cent from June 1, 2008 is withdrawn. A revised press release would be issued shortly," an official communique said.
The finance ministry notification came after much bickering with states and the differences with the states persisted on how to compensate them for revenue loss of about Rs13,000 crore in 2008-09.
CST was cut to three per cent on 1 April 2007 from four per cent and it was to be reduced to two per cent on 1 April 2008, before being phased out by March 2010.
However, an agreement on reduction to two per cent got delayed after states refused to increase value added tax (VAT) rate from four per cent to five per cent and bring textiles under its ambit.
"The empowered committee of state finance ministers will make every effort to prevail upon the state governments to impose VAT on textiles as also to increase the general VAT rate from four per cent to five per cent within the financial year 2008-09 as per agreement reached earlier," finance ministry had said in a statement acknowledging the differences with states on compensation.
While states will get some revenue from certain services, VAT on tobacco and removal of Form D, there was a dispute how the remaining Rs9,600 crore will be paid to states.
Finance ministry sources said states are refusing to raise VAT from four per cent to five per cent sighting inflation and assembly elections. States are also demanding cash compensation for Rs9,600 crore from the central government.
With no immediate solution in sight, the central government decided to withdraw the notification. The empowered committee, which will meet in the last week of June, is expected to further discuss the issue.
source:http://domain-b.com/economy/general/20080530_withdraws.html

Govt withdraws statement on CST cut

The government withdrew a statement on Friday about reducing the central sales tax (CST) rate to 2.0 percent on inter-state sale of goods from June 1.
Source:http://economictimes.indiatimes.com/News/Economy/Finance/articlelist/1286551815.cms

Central Sales Tax Reduced to 2%

NEW DELHI: The government on Friday announced the reduction of the Central Sales Tax on inter-State sale of goods from 3 to 2 per cent with effect from June 1. A notification to this effect was issued by the Department of Revenue.
The notification was in accordance with the announcement made by Finance Minister P. Chidambaram in his budget speech, an official statement said.
Discussions
The downward revision follows discussions between the Empowered Committee of State Finance Ministers and Mr. Chidambaram on compensation package for States, it said.
The government issued a press statement earlier in the day but withdrew it and reissued the same after modifying the reference related to Value Added Tax (VAT) panel making efforts to persuade the States to increase the value added tax from 4 to 5 per cent.
The rate of CST on inter-State sale of goods to registered dealers (against Form-C) shall now be the lower of 2 per cent and the rate of VAT or State Sales Tax applicable.
This reduction forms part of a road map for phasing out CST by March 31, 2010 in preparation for introducing Goods & Services Tax (GST), the statement said.
Source:Date:31/05/2008 URL: http://www.thehindu.com/2008/05/31/stories/2008053160561000.htm