A committee has recommended that individual states' central sales tax (CST) compensation claims of earlier years be settled on case to case basis at the earliest to pave way for smooth rollout of GST.

"The Committee has recommended that all unsettled CST compensation cases of individual states of earlier years should be decided on case to case basis at the earliest," Minister of State for Finance S S Palanimanickam said in a written reply to the Rajya Sabha.

The states want the central government to resolve the CST compensation issue before moving ahead with GST, a new indirect tax regime under which various levies would be subsumed into a single tax.

Finance Minister P Chidambaram had earlier constituted two committees to sort out contentious issues that hamper implementation of the Goods and Services Tax (GST).

While one committee was asked to deal with the Central Sales Tax (CST) compensation issue, the other was asked to deliberate on the design of the GST.

Earlier this month, state finance ministers had decided to prepare a model legislation and set up three committees to sort out various issues for smooth roll-out of the Goods and Services Tax (GST).

Last month, the states had agreed to a lower payment of Rs 34,000-crore for phasing out CST, a pre-condition for rollout of the GST.

According to the resolution at the meeting in Bubaneshwar on CST issue, the Centre would bear 100 percent of the loss accrued to states in 2010-11 fiscal on account of lowering of CST.

However, for 2011-12 and 2012-13 fiscal, the Centre would give 75 percent and 50 percent of the losses to states.

CST, a tax imposed on the inter-state movement of goods, was reduced from 4 percent to 3 percent in 2007-08 and further to 2 percent in 2008-09 after the introduction of Value-Added Tax (VAT). 
PTI