Centre considers compensation for Punjab, Haryana

The central government is considering to offer compensation packages to Punjab and Haryana for merging the purchase tax with the Goods and Services Tax (GST).

This was announced by S Dutt Mazumdar, special secretary and member, the Central Board of Excise and Customs (CBEC) during the 27th National Conference on GST organised by Assocham here today.

Mazumdar said there were many issues being debated currently, the purchase tax being one of them. The two states — Punjab and Haryana — are currently collecting Rs 1,000 crore each by way of the purchase tax, as there are more sellers than buyers in these states for the agricultural produce. As a way out, the central government was considering to offer compensation packages to them.

The Centre is also contemplating a proposal to set up a high-powered committee headed by the Union finance minister and the state finance ministers. This is to ensure that once GST was implemented, no state may impose any tax arbitrarily on any item, unless discussed and decided by the proposed committee.

According to Mazumdar, it is estimated that once GST is fully implemented, the current base of assesses will touch 5 million from the existing base of 960,000, with the assumption that the threshold limit shall be Rs 10 lakh for both the Centre and states.

Responding to the issue raised by the Assocham Secretary General D S Rawat, Mazumdar categorically stated that a flawless GST was not possible at initial stages. But, over a period of time, corrective measures would be taken.

Once implemented, not only the tax rate will come down from the current level of 27 per cent, but revenues of both the Centre and states are likely to go up. There was no possibility of the total collection being hit, said Mazumdar.

He further clarified that no benefit to any section of the society currently available shall be withdrawn. Rather, a mechanism shall be developed to bring all the elements under GST. He said that though the Centre was keen to bring petroleum products and alcohol under GST net, the states are vehemently opposing the same.