India GST: Indian States Request Central States Tax to Remain

July 29, 2010 Posted by India Briefing Reading Time: < 1 minute

Jul. 29 – Indian states are proposing that Central States Tax (CST) still be applicable when the pending Goods and Services Tax (GST) is implemented.

The local government wants the CST to remain in the first few years of India’s GST application as a way of ensuring revenue for them. The union government recently recommended that a three-rate structure be used for the GST.

CST was cut from 4 percent in 2007 to 2 percent in 2008 with plans to do away with it entirely by next year.

“The entire idea of GST was based on the premise of simplification and moving towards a single rate. Even if CST is levied at a nominal rate of 0.1 percent, it will defeat the purpose. It will give parallel power to states and some states may use it to increase rates,” said Atul Gupta, senior director at Deloitte.

The union government has already assured local governments that it would pay for revenue loss brought on by the reduction of the CST for the period 2009-10.