At Punjab’s instance, GOM to study GST revenue shortfall in states
Among 10 states facing maximum shortfall, Punjab was second to Puducherry in last quarter
I am the most worried man after Pak finance minister. Our GST shortfall is showing no signs of improvement. Even for services being consumed in Punjab, tax is going to states where offices of big companies are located. MANPREET BADAL, state finance minister to GST Council
CHANDIGARH : Punjab’s growing concern over revenue shortfall under the Goods and Services Tax (GST) regime echoed in the meeting of the GST Council in New Delhi on Saturday.
With other states too witnessing a sluggish growth, the council gave the go-ahead for a ministerial panel to take stock of the shortfall in tax mop-up by the states. Punjab is among the 10 states facing the maximum revenue shortfall and was second to Puducherry (42 per cent) in the last quarter. The shortfall in Punjab remains at 36 per cent in the December quarter too. The other states in the list are Himachal Pradesh, Uttarakhand, Jammu and Kashmir, Chhattisgarh, Goa, Odisha, Karnataka and Bihar.
On a lighter note, Punjab finance minister Manpreet Badal told the GST Council that he was the most worried man after Pakistan finance minister Asad Umar, who has to shore up his country’s financial position. “Our GST collections are showing no improvement. Punjab is a test case for the GST Council. If it sets Punjab right, it sets GST right,” Manpreet said.
Pakistan is seeking its largest loan package of up to USD 8 billion from the International Monetary Fund (IMF) to bail itself out from a balance-of-payments crisis that threatens to cripple the country’s economy.
Formed on Punjab’s insistence, the group of ministers (GOM) will study why GST collections of some states are not robust as compared to others and whether there are some underlying structural issues. Punjab has lost 40% tax base after purchase tax on foodgrains has been subsumed under GST. But so is the case in other states like Haryana and UP, who are not lagging behind in revenue.
“We have one of the highest number of taxpayers and our value added tax (VAT) collections were good. We need to understand if the shortfall is due to the basket of items and services Punjabis consume.
But even for services being consumed in Punjab, tax is going to states where offices of big corporates are located,” Manpreet said.
The GST growth is buoyant in states with big cities such as Gurugram (Haryana), Hyderabad (Telangana) and Mumbai (Maharashtra).
“Even if a person recharges his mobile phone number in Punjab, the company pays tax in Bengaluru, and not to us, if its offices are located there,” he added.
The deficit of states has to be neutralised within five years of launch of the GST.
And the fear of “falling from the cliff” once the protected revenue — assured annual growth of 14% over 2015-16 revenue — stops after five years was the reason Badal had told the GST Council during its meeting held in July this year that the state would be left with “no option but to fall out of line” going by the alarming shortfall in its revenue.
The state is staring at a shortfall of ₹10,000 crore for the 2018-19 financial year and this deficit may go up to ₹14,000 crore by 2022. The revenue shortfall also explains why the state is unwilling to cut down VAT on petrol, the highest in North India, and diesel. Of Punjab’s total fuel consumption, 80% is of diesel and even a rupee cut in VAT on diesel will translate into ₹400 crore revenue loss a year, the finance minister said.