punjab

Updated: Jul 01, 2017 09:30 IST

The stand of the Congress on the goods and services tax (GST) seems to be a study in contrast, depending on whether it is in power or opposition. While the party has decided to give the special midnight session of Parliament to roll out the new tax regime from July 1 a miss, the Punjab government will be “on the move” to support GST.

Saddled with high debt and a parched treasury, state finance minister Manpreet Badal sees GST as a game-changer for Punjab. “Initially, there will be a chaos. From next week, officers of the finance department, including I, will be travelling across the state to allay fears of traders and manufacturers who are protesting against the implementation of GST. It’s more a fear of the unknown. We will try to make the rollout as seamless and painless as possible,” he said.

According to the FM, Punjab stands to gain on many counts. “Our value-added tax (VAT) was among the highest. It not only rendered us uncompetitive as an investment destination, but also hit tax compliance. With GST, more traders are trying to get into the tax net. So both tax compliance and buoyancy will go up. Being a consumption state, Punjab also stands to gain as GST is a destination-based tax,” he explained.

Punjab has been promised a 14% growth in revenue for five years, starting with 2015-16 as base year for this fiscal, and so on. The state is expecting over 30% higher revenue in the first quarter of the GST rollout.

Sliding economy

A tardy tax administration has seen Punjab’s economy remain predominantly unorganised, helping many stay out of the tax net. There are just 2.4 lakh dealers registered with the state excise and taxation department. Of them, the majority have registered for GST.

“In the meeting of the GST council — comprising state finance ministers and presided over by Union finance minister Arun Jaitley — we are among the top five GST-ready states. Around 83% (2.05 lakh out of 2.4 lakh) had logged on to migrate to GST,” Manpreet said.

In his budget speech, the FM had highlighted how the growth of VAT receipts has been constantly declining from 32% in 2010-11 to a meagre 3% in 2015-16. “Factoring in inflation, there was negative growth of 2%,” he had said.

This, despite a high VAT rate. Its petrol and diesel prices were higher than those in the neighbouring states. The Food Corporation of India (FCI) and private players also had to shell out a purchase tax and infrastructure cess, in addition to VAT, on procurement of foodgrains from mandis .

For now, petroleum and liquor have been kept out of GST purview. The high revenue from liquor was one of the reasons for Punjab to partially circumvent the Supreme Court ban on sale of liquor on state and national highways by bringing in a law.

The government’s main challenge will now be to bring on board hundreds of small and medium textile units and traders who have been protesting against 5% on the sector.