Punjab demands ₹50,000 crore pending GST compensation

Punjab Finance Minister Advocate Harpal Singh Cheema has strongly demanded that the Central Government immediately release compensation of Rs.50,000 crore to Punjab to cover losses after GST implementation.

After participating in the two-day meeting of the GST Ministerial Group on health and insurance, rationalizing rates, and compensation cess, Cheema said that since the implementation of GST in 2017, Punjab has suffered a total financial loss of Rs.1,11,045 crore.

He added that despite receiving approximately Rs.60,000 crore as compensation from the Centre, Rs.50,000 crore is still pending. The Central Government had announced a 5-year compensation package to states in lieu of financial losses incurred due to GST implementation, but this compensation has now been discontinued.

He said that while the Punjab Government is not opposed to the rationalisation of Goods and Services Tax (GST) rates, the Union Government must take responsibility for the resulting financial losses to the states.

He said that the BJP-led Central Government is continuously undermining the financial structure of states, which is a significant attack on the federal structure of the country. Cheema stated that now the Central Government is even evading the release of funds to Punjab. He mentioned that apart from GST, Rs.8,000 crore of rural development funds and over Rs.1,000 crore under the Prime Minister's Road Scheme are also being withheld.

He added that when GST was implemented, all states stood united with the country, but now when the issue of compensating states for financial losses arises, the Centre turns a blind eye."

He said that the Central Government has made 27 amendments to GST so far and has adjusted the rates 15 times. Now, the Prime Minister Narendra Modi has proposed a new tax structure with two tier rates of 5% and 18%. He emphasized that even if these new GST changes are implemented, the Central Government should take responsibility for compensating states for financial losses.

Lashing at the Bharatiya Janata Party-led Union Government of repeatedly making changes to the GST system without reaching a definitive solution, Finance Minister Cheema said that this uncertainty leads to constant harassment of taxpayers and a systematic breakdown of the country’s financial framework. He pointed out that during a recent meeting on the Compensation Cess, the Centre informed that the loan repayment would be completed by October 31, and that the special tax on sin goods, which was a source of compensation for states, would also be reduced.

He criticized the GST rate rationalization, calling it irresponsible. As an example, he pointed out that while GST exemptions are being given to health and insurance, the sin tax on raw tobacco is being reduced from nearly 100% to 40%. He argued that reducing sin taxes on harmful goods is, in itself, an anti-social step." He warned that this gambling with the tax structure would cause massive harm to the nation, dismissing the centre’s promises as mere rhetoric.