NEW DELHI: Punjab Finance Minister Advocate Harpal Singh Cheema on Friday cautioned the Centre that GST rate rationalization, if carried out without a robust compensation mechanism, could destabilize state finances and undermine India’s federal structure.
He stressed that the benefits of the proposed rate changes should reach the poor struggling with inflation rather than corporate houses.
Cheema participated in a key consultation on GST rate rationalization held at Karnataka Bhawan in the national capital, attended by finance ministers and representatives from Karnataka, Himachal Pradesh, Jharkhand, West Bengal, Kerala, and Telangana.
The participating states collectively recommended that rate rationalization must be accompanied by a strong revenue protection framework to preserve states’ fiscal autonomy and uphold cooperative federalism.
“The GST was rolled out in July 2017 with the principle of revenue neutrality, but states have suffered heavy losses. Punjab alone has borne losses of around ₹1.11 lakh crore. While we received ₹60,000 crore during the compensation cess period, the Centre still owes us nearly ₹50,000 crore,” Cheema said.
He argued that unless states are adequately compensated, their ability to deliver welfare and development programs will be compromised. “Without revenue stabilization, how can states perform their constitutional duty of social welfare? If states are financially strong, only then can they strengthen the nation. The Centre must not shift the burden onto states,” he asserted.
The Punjab minister further supported the idea of imposing an additional levy on sin and luxury goods to sustain the current level of taxation, with proceeds fully transferred to states to address fiscal stress.
On the flood situation in Punjab, Cheema said the state government is working tirelessly to support affected families and will seek a special relief package from the Union government once damage assessment is completed. “The Centre should come forward to help Punjab in this calamity,” he said.
