There are issues needing further discussions before implementing the Goods & Services Tax (GST), was the view the Punjab government gave during the deliberations at the recently held meet of the empowered committee of state finance ministers on the proposed tax structure. Punjab, according to sources, stressed on the need to maintain fiscal autonomy of the states, as enshrined in the Constitution.

Punjab stated that some clauses leave the state government with very limited financial powers and in such a scenario, states would not be able to generate requisite funds for various developmental and non-developmental activities.

Another issue of utmost importance to Punjab was the subsumation of the purchase tax within the GST, as decision regarding subsuming purchase tax within GST has not been taken by the empowered committee of the state finance ministers. At present, Punjab was recieving about Rs 1,500 crore annual revenue, nearly 15 per cent of the total VAT revenue, from purchase tax on paddy, wheat, cotton, etc.

If the purchase tax was subsumed, the state would lose this revenue on a continuous basis. Punjab was contributing about 50 per cent of the total foodgrains to the Union government. The state government has requested that along with other items like petrol, diesel, natural gas, liquor, etc, the purchase tax on foodgrains be kept out of the GST’s purview.

Again, Punjab was collecting Rs 1,500 crore per annum in the form of Infrastructure Development Cess and Rural Development Fund, which was not a part of consolidated fund of the state. Till date, it was not clear from the model circulated by the Centre and from the White Book published by the Empowered Committee whether these two cess or funds were going to be subsumed in the GST model or not.

In view of this, the state government has sought clarification to formulate the views of the state government.

Opposing the subsuming of entry tax in the proposed GST, Punjab pointed out that in the earlier meetings of the Empowered Committee, it was decided not to subsume entry tax imposed by the states in lieu of octroi in the GST. However, in the proposed amendment bill and the report of committee on GST design, this has been included. As a consequence of this, the entry tax in lieu of octroi was also going to be subsumed in the GST. To protect the revenue of the Local Bodies, Punjab stressed the need for excluding it from the GST.

The state also mentioned that besides Punjab specific issues and host of other issues highlighted by other states like need for robust IT infrastructure, IGST and Inter-State transactions, Central legislation containing the structure of GST, GST compensation and incentives, GST on imports, composition scheme of tax and dual control, dual authority clearly indicates that a lot of ground work need to be done along to finalize views on GST design.