West Bengal chief minister Mamata Banerjee on Wednesday shot off a letter to Prime Minister Manmohan Singh, protesting the Centre's "unilateral decision" not to pay central sales tax (CST) compensation to states for 2011-12.
Expressing surprise at the decision, Banerjee said in her letter to the Prime Minister that "we find such unilateral decision of the government of India as most unacceptable, and once again it will have a negative impact on the spirit of federal structure of our nation."
"I believe that the empowered committee of the finance ministers of all states had unanimously opposed this cutting of CST compensation and, therefore, urge you to kindly withdraw the order and give full compensation to the states," the chief minister said in her letter.
Banerjee said "CST was at 4% and the resources raised accrued to the states. The government of India decided to lower the CST from 4% to 2% from June 1, 2008, and an agreed compensation package for consequential revenue loss to the state was worked out."
"The government of India continued to pay the CST compensation for 2007-08, 2008-09 and 2009-10 as per revised compensation guideline," the letter stated.
The chief minister said the Centre also agreed to pay CST compensatin for 2010-11. But 'surprisingly', the proposal for 2010-11 was 'unilaterally' reduced, deducting a notional amount not increasing VAT rate from 4% to 5%.
"The VAT rate change is clearly a prerogative of the state, and therefore, this is a unilateral decision," the letter said.
The chief minister said in her letter to the Prime Minister that the "unilateral" decisions of the Centre would result in a loss of Rs 1,800 crore for West Bengal.
"We are alarmed by the manner in which the Centre handled the issue of service tax and has unilaterally declared a negative list.
"I am informed that the empowered committee had put together, on a unanimous basis across states, a negative list of service tax and had sent the same to the central government," she said.
The chief minister said the Centre had, however, ignored this unanimous decision of the states and has issued its own negative list of few items.
"This decision is against the federal spirit of the constitution."
Banerjee urged the Prime Minster to withdraw the Centre's negative list order and instead replace with the unanimously decided list by empowered committee of finance ministers of all states.
"I do hope that the Centre will demonstrate its intent towards collective and cooperative federalism by reversing the decision of CST and recasting the negative list of service tax as opined by all states," he said.