Chandigarh/New Delhi, Aug. 30 – Punjab Finance Minister Advocate Harpal Singh Cheema has urged the central government to create a strong compensation mechanism for states under the proposed Goods and Services Tax (GST) rate rationalization, warning that without such safeguards, states could face severe financial instability.
Speaking after participating in a meeting on GST rate rationalization held at Karnataka Bhawan in the national capital, Cheema said the Centre must ensure that “the benefit of rationalization reaches poor people struggling with inflation, not corporate houses.” The consultation included finance ministers and representatives from Karnataka, Himachal Pradesh, Jharkhand, West Bengal, Kerala and Telangana.
Cheema said states were unanimous that any rate rationalization must be supported by “a robust revenue protection framework.” Only such an approach, he added, would safeguard the fiscal autonomy of states and uphold the spirit of cooperative federalism.
“The GST was rolled out in July 2017 with the principle of revenue neutrality at its core, but in practice, states have suffered significant losses,” Cheema said. He noted that Punjab alone had incurred a financial loss of nearly ₹1.11 lakh crore since GST implementation. Of this, the state received only ₹60,000 crore during the period when the compensation cess was active, leaving nearly ₹50,000 crore in uncompensated losses. “Till date, no step has been taken by the Centre to cover this shortfall,” he said.
Cheema told reporters that states demanded an additional levy on sin and luxury goods to preserve the effective level of taxation, with all proceeds to be fully transferred to states. “Without revenue stabilisation, how can states perform their constitutional duty of social welfare?” he asked. “If states are financially strong, only then can they play a pivotal role in strengthening the country.”
He cautioned against the Centre retaining a larger share of revenues at the cost of states. “The Centre should not shift the burden onto the shoulders of the states,” Cheema said. “The revenue interests of all states must be protected, and a robust mechanism must be put in place to achieve this goal.”
Cheema also said the participating states represented a collective voice on behalf of other states across the country.
Responding to questions on the flood situation in Punjab, the Finance Minister said the state government was working “sincerely” to help affected families and would demand a special package from the Centre once damage assessments were completed. “The Union government should come forward to help Punjab in this calamity,” he said.
