The central sales tax has now been reduced by 2% this decision has been taken on the basis of the discussions between the Empowered Committee (EC) of State Finance Ministers and the Union Finance Minister. The notification has been issued on 30th May, 2008 and it will be implemented from 1st June, 2008.

 

This move is in the spirit of encouraging trade between multiple states. According to the roadmap the CST will be completely eliminated by the year 2010. This tax will be replaced by the new Goods & Services Tax (GST). The roadmap for the GTS tax is being worked out by the Empowered Committee of State Finance Ministers along with the Union Finance Ministry.

The state governments will be compensated for the revenue loss due to reduction of the tax. However the compensation of this revenue loss will be proportionate to the actual collection of Central Sales Tax in the relevant year.