The centre and the states would have a “joint mechanism” for facilitating compensation claims of losses by states due to reduction in Central Sales Tax in 2007-08, the Empowered Committee of State Finance Ministers today said after meeting Finance Minister Pranab Mukherjee here.

“There will be a joint mechanism involving Government of India officials, Empowered Committee Secretariat and state officials to facilitate the compensation,” Asim Dasgupta, chairman of Empowered Committee of State Finance Ministers on VAT told reporters after the meeting.

He said that the Finance Minister’s approach to the issue was positive and the deadline of April 1, 2010, would be met.

“We had discussed issues relating to compensation for losses to states due to reduction of CST... We propose that there will be very soon convergence of views arrived at by union finance ministry and us working together to resolve the issue”. The issue of compensation is yet to be resolved due to the differences in the amount of compensation. He said that the state finance ministers would meet Mukherjee next month on the issue.

However, Dasgupta refrained from giving any figures for the losses incurred by the states. But he said that states were earning Rs 19,000 crore when CST was four per cent in 2006-07. Had it been retained at four per cent in 2007-08, states would have earned Rs 26,000 crore that year, he added.

The CST, a tax on movement of goods from one state to another, was reduced from 4 per cent to 3 per cent in 2007-08 and further to 2 per cent in 2008-09 after VAT was introduced. States are asking to clear pending dues of compensation since 2007-08 and also new claims for this year.