Bhubaneswar, Sept. 3: The Odisha government today claimed to have lost revenue of over Rs 500 crore because of partial abolition of central sales tax (CST), which has weakened the financial condition of the backward state.

“The state has lost Rs 1,885 crore between 2007-11 after the central sales tax rate was reduced from 4 per cent to 2 per cent. However, the Centre had sanctioned Rs 1,303 crore till 2010 to compensate the loss,” state’s finance minister Prasanna Acharya told the Assembly today.

The Centre has not released a single pie in subsequent two years (2011-12 and 2012-13) to compensate the revenue loss, he said.

The Centre had slashed the sales tax rate from the existing 4 per cent to 3 per cent from April 2007 as part of its decision to phase out the tax.

The tax rate was further revised to 2 per cent from June 2008. The central sales tax would be abolished after the goods and services tax (GST) comes into force.

A bill to bring in the goods and services tax has been pending before the Parliament since 2011.

On April 19, chief minister Naveen Patnaik urged Prime Minister Manmohan Singh to restore the old rate (4 per cent) till the implementation of the Goods and Services Tax Act, so that the state would not incur loss.

“However, the Centre is yet to respond,” Acharya told the Assembly, which expressed concern over the fiscal crisis.

Tamil Nadu chief minister J. Jayalalithaa has also written to the Centre on the same line, he said.

The decision to phase out the CST was taken keeping the introduction of the GST in view. The then Union finance minister, P. Chidambaram, had announced that the GST would be effective from April 2010. But, the GST bill is still pending in the Parliament owing to lack of consensus, said the state finance minister.

It was initially agreed upon at the meeting of the Empowered Committee of state finance ministers to adopt the Compound Annual Growth Rate (CAGR) method for calculating the compensation amount.

“Based on the method, Odisha would have been paid a compensation of Rs 4,210 crore for the period between 2007-08 and 2010-11.

“However, the Centre unilaterally withdrew the Compound Annual Growth Rate method and decided to follow the proportionate loss method. Under the new formula, the state should have got Rs 1,885.68 crore. But, it was sanctioned Rs 1,303.08 crore,” said Acharya.

“This is an attack on the basic federal structure of the country,” said BJD members Amar Prasad Satpathy and Ranendra Pratap Swain, noting that the views of the Empowered Committee on sharing of central taxes were being ignored.

Swain said a unanimous resolution should be adopted in the Assembly pressing for the state’s demand.