Centre, States differ on LPG tax issue; consensus on CST phase-out

New Delhi, Mar 22 (UNI) Differences persisted between the Centre and the States on the issue of compensation to the States as a result of reduction in the Valued Added Tax (VAT) on the LPG cooking gas while they agreed to form a committe on the phase-out of the Central Sales Tax (CST).

The meeting between the State Finance Ministers' Empowered Committee chaired by West Bengal Finance Minister Asim Dasgupta and Finance Minister P Chidambaram could not reach an agreement on the contentious issue of the states' demand for compensation of loss on reducing the VAT on LPG.

A few of the Finance Ministers told reporters after the meeting that the Centre has virtually rejected their demand for the compensation. As a direct consequence to the consumers in Delhi, the prices of LPG would not be reduced since the benefit of slashing VAT from 12 per cent to four cent would go to the oil companies and not the users.

In another important decision on the phase out of the CST, a Committee would be appointed which will give its report in April itself and the work would start on the removal of the Central Sales Tax from the second quarter of next fiscal, Mr Dasgupta told reporters.''By the second quarter, we will be on the job,'' he said.

The Finance Minister had announced in the Budget that the States should also bear a portion of the burden of the high prices of petroleum products. '' Hence, in order to moderate the price of LPG I propose to include the LPG in the list of 'declared goods' under the CST Act,'' the Budget speech said.

By implication, it meant the reduction of VAT on LPG by all the states to a uniform rate of four per cent but the benefit had to go to the oil companies.

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