Post GST, Punjab suffers 48 pc monthly revenue deficit

State’s average collection has dipped to Rs 933-crore against the committed Rs 1,787-crore per month, according to government records.

Manish Tiwari | Chandigarh
In what appears to be a major crisis, Punjab has been suffering a deficit of 48 per cent in revenue collection per month after the implementation of GST (Goods and Services Tax), the biggest tax reform introduced on July 1, 2017, by the Centre to make “one nation, one tax” in the country, it is learnt.
The state’s average collection per month has dipped to Rs 933 crore against the committed collection of Rs 1,787 crore, official figures reveal.
Maintaining the shocking revenue dip, Finance and Planning Minister Manpreet Singh Badal had informed the 15th Finance Commission that such a huge gap has arisen primarily on account of the discontinuation of state levies such as purchase tax and ID fee on food grains which totalled nearly 25 per cent of state’s base year revenue and have found no replacement in GST.
“While Punjab’s problem is particularly acute in the GST regime, nearly all states are facing some deficits that will only aggravate over the years and the compensation cess will fall woefully short to meet the rising deficits,” said Manpreet, adding the challenge is huge and need to be addressed right away even while it is possible to modulate GST.
In his presentation to the Finance Commission, Punjab’s Finance Minister had recommended relatively higher rate of SGST. “It seems that the equal rates of CGST and SGST, that are prevalent now, may need to make way for a relatively higher rate of SGST, which may be so chosen that at
least the top half of the state do not need may compensation. A recommendation from the Finance Commission will provide a catalyst for this change,” he pressed.
For the states like Punjab where the position is more aggravate, Finance Commission was urged to recommend a
graded compensation tapering formula to the Centre beyond June, 2022.
Manpreet said he was often advised to increase the rates of taxes that are outside the GST that constitute nearly 50 per cent of state’s total tax revenues. “This suggestion remains largely unworkable, particularly for state likes Punjab, with relatively smaller territories. The constitutional amendment relating to GST has also done away with Entry 52 relating to imposition of tax for the entry of goods in any local area. Ideally, this entry should have been removed only for goods that were included in GST. However, it applies to all goods. As a result, it is possible for even excluded petroleum products to come into s state with all taxes legitimately going to the origin state. Moreover, any comparative increase in tax rates makes smuggling from neighbouring states for more attractive,” the Finance Minister had stressed.
He also reminded the 15th Finance Commission that the 13th Finance Commission had recommended a GST rate of 5 per cent for the Centre and 7 per cent for the states. Even the Arvind Subramanian Committee recommended a RNR of 7 per cent for Centre and 8 per cent for the states in a single rate structure and a standard rate of 8 per cent for Centre and 9 per cent for the states in a dual structure.
Bringing on record that Punjab has taken the maximum hit post GST, Manpreet said Punjab rank highest amongst all the states with a shortage of 37 per cent during 2017-18 and 36 per cent for the current year. The figures would have been much higher but for the adjustment made in pursuance to a decision of the GST Council to provisionally distribute the unused IGST on 50:50 basis between Centre and the States. “This amount will not be available in future years barring a miniscule portion, once the opening balance of IGST starts equalling the closing balance,” Manpreet noted.

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