Central Sales Tax to Remain Under New Tax Regime

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Sept. 22 – Central government authorities have given their partial approval to the local government proposal that they be allowed to continue to charge Central Sales Tax (CST) on goods even under the new Goods and Services Tax (GST).

If implemented, states will be able to levy and keep CST on goods outside the GST gambit that includes petroleum, gasoline, aviation turbine fuel, natural gas and alcohol.

States are also proposing that they be allowed to levy CST on inter-state movement of all goods. This proposal seems unlikely since GST will work like a destination-based tax as opposed to the CST that will work as an origin-based tax.

“Some exporting states like Madhya Pradesh and Gujarat want CST on inter-state movement of all goods, but that will lead to distortions. Goods outside the GST chain can attract CST or any other tax levied at present. The CST rate on these goods can be decided later. It can be kept at the existing level of two percent or even more or less,” said a finance ministry official.

Finance Minister Pranab Mukherjee assured states that the government will compensate them for any income loss incurred when the new GST is finally implemented.