Union finance minister P Chidambaram’s announcement on compensation to states for switching to Goods and Services Tax (GST) from Central Sales Tax (CST) is set to benefit Andhra Pradesh over Rs 1,000 crore out of the total Rs 9,000 crore earmarked for the 2013-14 financial year.

CST is a tax on inter-state movement of goods imposed by the Centre but collected by states. The states were asked to gradually phase out CST to enable GST introduction in 2010-11. According to sources, the Centre has to pay Rs 3,580 crore to AP to compensate the reduction in the Central Sales Tax (CST) for 2010 and 2011 financial years and switching over to GST.

The Centre had earlier released Rs 6,000 crore as compensation to states for CST in fiscal 2010-11, while the states are demanding Rs 19,000 crore.