GST Rate Changes Must Protect States’ Finances, Says Punjab Finance Minister Harpal Singh Cheema

Punjab Finance Minister Harpal Singh Cheema has asked the central government to ensure a strong compensation system for states while discussing changes in Goods and Services Tax (GST) rates. He said that the benefit of GST rationalization should directly help common people facing inflation, instead of giving advantage to big companies.

Need for Protection of States’ Revenue

Mr. Cheema warned that implementing GST rate rationalization without a proper system to cover revenue losses could bring financial instability to states and weaken the federal setup of the country, which would not be acceptable. He joined a key meeting on GST rate rationalization consultation along with finance ministers and officials from states including Karnataka, Himachal Pradesh, Jharkhand, West Bengal, Kerala, and Telangana. The states collectively recommended that rate rationalization should only move forward if a solid revenue protection framework is in place to safeguard state finances.

Punjab’s Revenue Loss After GST Implementation

The minister highlighted that GST was launched in July 2017 with the idea of revenue neutrality, but states ended up facing heavy losses. Punjab alone has suffered a financial setback of nearly ₹1.11 lakh crore since its rollout. Out of this, only about ₹60,000 crore was compensated through the GST compensation cess, leaving a pending loss of almost ₹50,000 crore that the central government has not yet addressed.

Call for Levy on Sin and Luxury Goods

Talking to reporters, Mr. Cheema said that all participating states strongly demanded an additional levy on sin and luxury items. He explained that the money collected from this should be directly transferred to states to help them handle growing financial stress and to protect their fiscal independence. He questioned how states could fulfill their duty of providing social welfare if their revenues are not stabilized, and cautioned the centre against keeping most of the revenue with itself while shifting responsibilities onto states.

Appeal for Central Support in Flood Situation

Responding to a question about the flood situation in Punjab, Mr. Cheema urged the union government to provide immediate support. He mentioned that the state government is working with full sincerity to help affected people and will seek a special package from the centre once a proper damage assessment is completed.