CST Rate Slashed

The Centre on May 30 declared that Central sales tax (CST), a tax on inter-state sale of goods, would stand reduced to 2 per cent with effect from June 1 this year. A notification to this effect was issued on May 30 by the Union Finance Ministry. The notification of new CST rate of 2 per cent in place of the earlier 3 per cent is in accordance with the declaration made by the Union Finance Minister, Mr P. Chidambaram, in his budget speech in February this year. The rate of CST on interstate sale of goods to registered dealers (against Form-C) will now be the lower of 2 per cent and the rate of VAT or State Sales Tax applicable. This decrease forms a part of the roadmap for phasing out CST, to be completed by March 31, 2010. The Central Government and the Empowered Committee of State Finance Ministers have further accorded that the compensation for revenue loss to the States in any year arising from the lowering of CST will be limited to the proportionate loss based on the actual collection of CST in the relevant year.