- The panel had three members - from opposition-ruled Punjab and Jharkhand, and BJP-ruled Delhi
- The finance ministers of Punjab and Jharkhand said states should be compensated for losses from GST reforms
- Delhi's industries minister said the rates are the same for all and states should look at their own policies
The finance minister of Punjab and Jharkhand and the industries minister of Delhi ensured a spirited start to the NDTV Profit GST Conclave on Tuesday, with their panel discussion on 'Matters of States' witnessing a heated debate on potential losses because of the GST reforms, and the responsibilities of the Centre and states.
Finance Minister Nirmala Sitharaman had, last week, announced a major overhaul in the Goods and Services Tax (GST) by cutting the number of main slabs from four to two - retaining only 5% and 18% - and reducing the tax on several goods - even making it zero for personal health insurance and some life-saving medicines.
The decision was taken jointly by the GST Council, which has representatives of all states, and when this was pointed out to Punjab Finance Minister Harpal Singh Cheema and his Jharkhand counterpart Radha Krishna Kishore, they said they welcomed the reforms but also insisted that the Centre should compensate states for any losses they may incur.
Mr Cheema and Mr Kishore said that their states - ruled by the AAP and the JMM-Congress alliance respectively - have been facing losses after the GST was introduced in 2017 and the period of five years for which compensation was provided by the Centre came to an end in 2022. Delhi Industries Minister Manjinder Singh Sirsa, however, emphasised that the tax will be the same for all states and if some do face losses, it will be because of their own policies and their failure to attract industry.
"The rate reduction in GST has been welcomed by all states and we have welcomed it too. We had demanded that the number of slabs be reduced. In the eight-year journey of the GST, there were several complications faced by the Centre and states, which needed to be simplified. But the losses faced by states' economies need to be looked into and compensated. This was a demand made by opposition- and BJP-ruled states during the GST council meeting," Punjab Finance Minister Harpal Singh Cheema said.
The minister claimed that several states have been facing a revenue loss since GST was introduced in 2017, replacing Value Added Tax (VAT) and other taxes at the state level. The compensatory mechanism ended in 2022, but states' economies have not stabilised so far, he said.
Citing figures, Mr Cheema said Punjab's revenue collection at a compounded annual growth rate of 13.11% which existed in 2017, would be Rs 2.37 lakh crore if VAT had continued, but it was actually Rs 1.26 lakh crore.
"This means the state has faced a loss of Rs 1.11 crore in eight years. We got Rs 61,000 crore as compensation, but how do we make up for the other approximately Rs 50,000 crore? This means states' economies are continuously being destabilised, whether they are in BJP-ruled states or opposition-ruled ones. Protecting the federal structure and stabilising states' economies is the responsibility of the Centre. Our responsibility is compliance, and Punjab is one of the states that leads in that... If we are still facing losses, it means the system is still flawed," he pointed out.
Mr Cheema also said the Centre should have presented data on the states' revenue before GST and after its introduction at the GST council meeting, so that everyone would be clear on its impact and where they stand, but this was not done.
'Premature Decision'
Asked why these problems were being raised despite there being a consensus in the GST council, Jharkhand Finance Minister Radha Krishna Kishore said these were flagged at the meeting as well by ministers of eight opposition-ruled states. While supporting the reforms to ensure the right message was sent out to the country, Mr Kishore said, the ministers called for states to be compensated for losses because of them.
The need for the reforms, he said, had also proved that Congress leader Rahul Gandhi's statement in 2017 about GST being rolled out in a hurry was correct. "They have figured some of these things out eight years on... So it is clear that the implementation of the GST in 2017 was a premature decision," he said.
Need For Introspection
Manjinder Singh Sirsa, the Industries Minister from BJP-ruled Delhi said GST was the biggest reform India had seen in 70 years when it was introduced in 2017. The introduction was done after arriving at a consensus and the Centre had agreed to compensate states for five years, if needed, to make the transition easier.
Stressing that the GST rates were the same for everyone, from Punjab to Haryana and Uttar Pradesh to Bihar and Jharkhand, Mr Sirsa said there is no question of being unfair to anybody. States, he said, can't call for rates to be reduced on the one hand and ask the Centre for compensation on the other.
"Delhi will also be under 5% and 18%, so will Uttar Pradesh, Punjab and Jharkhand. So if a state is suffering losses, there's only one reason. It is that the state is not being able to attract industry, enough business is not happening there and its local policies are such that industries are leaving to go to other states... the circumstances are such that people don't have confidence," the minister said.
"So every state should focus on providing resources and a stable government and policies, ensuring better coordination, and ending red tape. Increasing or decreasing a state government's GST revenues is not in the hands of the Centre. If Haryana, which was a part of Punjab, is doing fine, why can't Punjab do it? States need to introspect and figure out where they are going wrong. If you want to make something political and blame someone else for your problems, you will not be able to work for the betterment of your state or the people," he argued.
