Centre considers compensation for Punjab, Haryana

Punjab and Haryana, which fear huge loss of revenue with purchase tax subsuming with the proposed GST, may get compensation, a Central Board of Excise and Customs (CBEC) official said on Friday.

“We may consider compensation for states like Punjab and Haryana, which have expressed concerns of losing revenue due to subsuming of purchase tax with goods & services tax (GST),” Central Board of Excise and Customs (CBEC), member and special secretary, S Dutt Majumder said here.

Both Punjab and Haryana levy 4% purchase tax on foodgrain such as wheat and paddy. Addressing the 27th National Conference on GST organised by Assocham here, he said the issue of subsuming of purchase tax (value added tax) is being debated as agricultural states like Punjab and Haryana are going to be affected with it.

When contacted Punjab?s finance minister, Manpreet Singh Badal told FE that “Punjab and Haryana earn about Rs 1100 crores and Rs 700 crores respectively by way of purchase tax on the purchase of wheat and paddy which is procured for the Central pool. Once GST is introduced both agricultural states would lose substantial revenue”.

“We are all for protecting the revenue earned by both the states from purchase tax. Either purchase tax on foodgrains be not subsumed in GSR or Punjab and Haryana should be compensated”.

About Purchase Tax collection during the last three years, Badal said that the figure remained almost the same as there was not much hike in MSP during these years.

The food grain growing states like Punjab have been demanding the exclusion of purchase tax from GST in order to avoid their revenue losses.

Punjab and Haryana have projected a revenue loss of Rs 1,000 crore and Rs 600 crore, respectively on account of inclusion of purchase tax with the proposed GST.

The Centre is working to introduce a uniform GST that will replace most of the indirect taxes at central and state levels like service tax, excise duty, VAT, and other local levies. GST was earlier scheduled to be implemented from April 1, but now the Centre and states are trying to introduce it by 2011-12.