Government introduced two Bills in Lok Sabha on Friday -- one seeking to phase out central sales tax  in four stages and eventually abolish it in three years and another to give more operational flexibility to the Reserve Bank of India.

Abolition of CST will pave the way for an integrated goods and services tax which will be introduced by April 1, 2010.

Piloting the Taxation Laws (Amendment) Bill to amend the CST Act, 1956, Finance Minister P Chidambaram said in the first step, CST is proposed to be reduced from four to three per cent from April 1.

It will go down from three to two per cent from April one, 2008, from two to one per cent from April 1, 2009 and eventually abolished on March 31, 2010. The agreed package for compensation to states for revenue loss on this account would consist of non-monetary as well as monetary measures, the minister said in the statement of objects and reasons in the Bill.

The Banking Regulation (Amendment) Bill, on the other hand, proposes to replace an ordinance promulgated on January 23. The ordinance seeks to amend section 24 of the Banking Regulation Act, 1949 to enable the RBI to specify the statutory liquidity ratio without any floor rate.

Changes proposed in section 53 of the Act will make it mandatory to present draft notification before both Houses of Parliament in cases of exemptions being granted to institutions, banks or branches located in special economic zones.

Chidambaram said it was necessary that the RBI, as the regulator and the authority vested with the powers to conduct monetary policy, has the necessary flexibility regarding stipulation of holding of liquid instruments by banks. Hence, it was felt that the existing floor rate of 25 per cent has to be removed keeping intact the ceiling of 40 per cent as the guidance for RBI.