"...despite difficult and challenging situation, I propose to release about Rs 11,000 crore, which is one-third, this year as a part payment as a CST compensation to the states," he said replying to a debate on Supplementary Demand for Grants in the Lok Sabha.
    
CST compensation is one sticky issue that has been holding up agreement on introduction of the Goods and Services Tax (GST) regime to replace all indirect taxes.
    
"The balance amount I will start paying from the next financial year onwards and hopefully...and therefore I am making this commitment to this house today...and if necessary, the financial year is up to 31st of March, I hope my revenue position is in a position to afford this kind of an expenditure," he added.
    
Jaitley has called a meeting of all state finance ministers tomorrow to iron out contentious issues as he looks to introduce a constitutional amendment bill in the current session of Parliament.
    
"I have tomorrow called all the finance ministers of the state and GST is an issue on which broadly most parties have agreed. Let me put the statement: a major impediment in the implementation of the GST has been the trust deficit between the states and the centre," he said.
    
"One of the major reasons for this trust deficit is non-payment of the CST compensation to the states from the year 2010 onwards," he said.
    
Clearance of CST compensation arrears has been a bone of contention between the Centre and states, as the states still wait for Rs 13,000 crore arrears pending till 2010.
    
As regards the compensation structure, the states have sought a five-year compensation mechanism from the Centre and demanded the same be included in the Constitutional Amendment Bill.
    
CST, a tax imposed on the inter-state movement of goods, was reduced from 4 per cent to 3 per cent in 2007-08 and further to 2 per cent in 2008-09 after the introduction of Value-Added Tax (VAT). The Centre had then promised the states that it would bear losses due to reduction of CST.
    
As part of the roll-out of GST, the CST is being phased out and has been reduced to two per cent from the earlier four per cent. The Centre collects CST and distributes it among states.
    
GST is being targeted to be implemented by April 2016.
    
The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT and local levies on the states front.
    
Jaitley further said: "In my meeting with the empowered committee with state finance ministers on July 3, 2014, I had committed that the partial payment of the outstanding CST compensation will be released this year."

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