When it comes to negotiations, the outgoing Finance Minister, Mr Pranab Mukherjee, is clearly the man politicians trust the most.

The Empowered Committee of State Finance Ministers has written to Mr Mukherjee asking him to resolve the issue of Central Sales Tax (CST) compensation before he demits office.

CST is levied on goods in inter-State trade. As a precursor to the introduction of the GST, it was decided to phase out CST over a three-year period (2006-07, 2007-08, and 2008-09) on the assumption that GST would be introduced from April 1, 2010. It was also decided that compensation will be given on account of reduction of CST.

In a letter dated June 22, the Chairman of the Empowered Committee of State Finance Ministers, Mr Sushil Kumar Modi, said: “I understand that you may be soon demitting office of the Finance Minister. I, therefore, humbly request you to kindly resolve the CST compensation issue before that.” The Finance Minister is expected to step down in next two-three days to contest the Presidential election. Mr Modi, who is also the Deputy Chief Minister of Bihar, has further written that if the issue remain unresolved any longer, it might affect the implementation of GST.

After postponing it twice, the Centre now aims to introduce the GST from April 1, 2013. Once implemented, it will subsume most of the indirect Central and States taxes, duties and service taxes.

Earlier, the Centre had decided to give Rs 6,393.94 crore as CST compensation for 2010-11 and termed this a result of the discussions between the Centre and the States. The Revenue Secretary Mr R. S. Gujral, also informed the States that the issue of payment of compensation for 2010-11 might be considered as finally settled as far as the Centre is concerned there will be no compensation for 2011-12

>Shishir.s@thehindu.co.in

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