State Governments have asked the Centre to compensate them for revenue loss of over Rs 9,000 crore due to proposed cut in Central Sales Tax from 4 to 2 per cent next fiscal.
Finance Minister P Chidambaram held consultations with Empowered Committee on Value Added Tax to form a strategy to phase out CST from April 2006.
Panel Chairman of VAT, Asim Dasgupta said, that avenues for compensating the loss to states was discussed in the meeting.
Another meeting is scheduled to be held during mid March between VAT panel and the Finance Minister to workout modalities of compensation, he said.
Presently about Rs 18,000 crore in CST is reimbursed to them by Centre.
VAT panel said Centre should take into account not only current collection levels of CST but also its possible increase before it decides on the compensation package.
The panel had suggested options of levying VAT on sugar, tobacco and textile, which are presently out of the purview of VAT.
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