New Delhi (PTI): The fate of planned reduction in Centre Sales Tax by one per cent from this fiscal hangs in balance with the impasse between union and state governments over the compensation for revenue loss to states continuing.

Already one and a half months of this fiscal are over, but CST reduction from three per cent to two per cent is yet to take place due to continued stalemate between the Centre and states, sources said.

The CST cut is not likely to be introduced with retrospective effect from April 1, 2008, VAT Committee Chairman Asim Dasgupta had said earlier.

While the Centre insists that state governments keep up the promise given by their finance ministers to increase the VAT rate from four to five per cent, impose VAT on textiles from this fiscal, states are not ready for it.

States attribute their decision not to go for VAT rate hike to high inflation, which has reached 7.83 per cent.