Punjab may “suffer financial loss” after the implementation of proposed Goods and Services Tax (GST), state Finance Minister Parminder Singh Dhindsa said.
He also expressed doubt over full compensation of state’s revenue loss of about Rs 6,000 crore after state levies set to be subsumed in GST.
The Minister said GST will also “not bring any kind of relief” to common man, though he said it will provide a fillip to industrial growth.
“GST for state finances, I think Punjab is going to lose because taxes (state levies) like purchase tax, ID cess, PIDB cess, RDF with collection of Rs 5,000-6,000 crore will be subsumed in GST and then revenue of the state will come down. But for five years (after GST implementation), we do not need to worry as we will be fully compensated by Centre,” Dhindsa told reporters here.
However, he raised a question over the recovery of revenue loss after five years of implementation of GST.
“And now question arises what after five years. Whether the economy will grow to the extent that it will able to bridge the gap of our revenue, I am skeptical about it. I do not think it will be possible to bridge the gap of Rs 6,000 crore…For state finances, I think after five years, we may suffer financial loss,” he said.
Billed as the biggest indirect tax reform since 1947 which is expected to boost manufacturing, GST will replace central taxes like excise duty and service tax and state levies such as sales, value-added, entertainment and purchase taxes. All entry taxes like octroi will also be subsumed under GST.
Asked whether GST will be beneficial for the state, the finance minister said it will be beneficial for it as it will help the promotion of industry.
“But for common man, it won’t make much of difference. As the revenue neutral rate (RNR), the rate at which revenue of state and government of India will remain at par. With the implementation of GST, neither there should be burden on people nor any kind of relief,” he said.