Haryana wants compensation of Rs 2,500-cr in CST loss

Written by States Bureau | Chandigarh, Jan 30 | Updated: Jan 31 2008, 07:39am hrs
Haryana has fallen in line with other states as it has opposed the move to gradually phase out central sales tax (CST), which would result into to a loss of Rs 2,500 crore per annum to the state.

Sources in state finance department told FE here on Wednesday that this year alone, the state had to forgo about Rs 550 crore due to the reduction of CST by 1%. In view of this, Haryana along with neighbouring Punjab has pleaded with the Centre to compensate them for the loss of CST.

The total revenue receipts in Haryana in 2007 were estimated at Rs 17,917 crore and the growth rate on constant prices was a healthy 10.67%. However, it was Vat which had brought cheers to the state as "despite wide-ranging relief granted to various segments of the society, Vat collection had recorded an increase of 21% last year".

The latest figure of Vat collections show that Haryana has collected Vat of Rs 3,534 crore till October 2007. The state has set a target of collecting Vat amounting to Rs 6,660 crore by March 2008 against Rs 5,366 it did in the last fiscal. Sources said, "The state is hoping to surpass the target of Vat collections this year also. Haryana was also in line with majority of states that have decided to ask for Rs 10,000 crore in budgetary support for 2008-09 from the Centre, as compensation for the further reduction in central sales tax up from the Rs 2,500-crore grant-in-aid provided by the Centre this fiscal as compensation towards the 1% cut in the tax."

Haryana is also against the move to increase Vat rates from 4% to 5%. The decision comes soon after states expressed concern over revenue losses to the tune of Rs 13,000 crore and loss of Haryana state alone would be about Rs 2,500 crore. The CST is charged when goods produced or stored in a particular state are moved to another state.

The maximum amount of CST was earned by Haryana from Maruti Udyog Ltd, in Gurgaon. Haryana does not buy the Union government's theory that the abolition of CST will allow the free movement of goods among the states.