New Delhi, July 4 Presenting an overview of the state’s revenue, Punjab Finance Minister Harpal Singh Cheema on Friday emphasised on bringing structural changes in the Goods and Services Tax (GST) regime and proposed policy recommendations for revenue augmentation, including foodgrains under its framework.
He suggested that a unified platform can be developed, giving access to all states and the Central Tax Authority for data analytics and detecting tax evasion and compliance issues.
Highlighting the revenue loss the state has faced due to the subsumption of various taxes after the implementation of GST, Finance Minister Cheema said Punjab, as an agrarian economy, heavily relied on Purchase Tax and Infrastructure Development Fee (ID Fee) on sale of grains (wheat and rice), collecting Rs 3,094 crore in 2015-16, which represented 16.55 per cent of its total tax revenue and experienced a permanent loss of revenue as a result of subsumption of these taxes.
He also pointed out the loss from the subsumption of Central Sales Tax (CST), which previously contributed Rs 568 crore to Punjab’s revenue in 2015-16. Furthermore, Finance Minister Cheema highlighted that under the previous VAT regime, Punjab had a higher collection of revenue as compared to the GST regime. The minister expressed concern over a consistent shortfall in the state’s GST collection since July 2017, with actual revenue significantly lower than the projected revenue based on a 14 per cent growth rate on the base year.
He said that had the GST not been implemented, Punjab's revenue position would have been better, even with a conservative 10 per cent CAGR growth. He said Punjab has faced a revenue shortfall of Rs 47,037 crore since July 1, 2022. “States dependent on agriculture, like Punjab, should be compensated for the permanent loss of revenue due to the subsumption of purchase tax on food grains.”
Finance Minister Cheema also highlighted a paradoxical situation where major industrial sectors in Punjab, such as agricultural implements, cycle and cycle parts, and hosiery goods, show high gross turnovers but do not exhibit a commensurate increase in GST collection.
“This is largely due to GST being a destination-based consumption tax, leading to revenue flowing out of Punjab through SGST input tax credit adjustments against IGST liability, creating a net outflow of revenue,” he added.
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