In the Budget Speech 2007-08 it was announced by then Hon’ble Finance Minister that “ VAT has proved to be an unqualified success. VAT revenues of the implementing States increased by 13.8 % in 2005-06 and by 24.3 %in the first nine months of 2006-07. The next logical step is to phase out Central Sales Tax (CST). The Central Government has reached an agreement with State Governments to phase out CST.Consequently, the CST rate will be reduced from 4 per cent to 3 per cent with effect from April 1, 2007. I have provided Rs.5,495 crore for compensation for losses, if any, on account of VAT and also on account of CST”. Accordingly, as per the consensus arrived between the Centre and the State Governments, the rate of CST was reduced from 4% to 3% with effect from 1st April, 2007.