Punjab, Haryana assured of purchase tax loss compensation

The Centre on Wednesday assured the states of Punjab and Haryana that it would compensate them if they incurred any losses due to purchase tax getting subsumed under the GST regime as provided in the bill passed by the Lok Sabha.

"Punjab has a dual character, as an agricultural state and also as a manufacturing one if you look at the areas around Ludhiana, Jalandhar," Finance Minister Arun Jaitley said replying to the debate on the goods and services tax (GST) constitutional amendment bill in the Lok Sabha on Wednesday.

"In Haryana, for instance, any shortfall from loss of purchase tax collection will be amply made up by the service tax collection from booming areas like Gurgaon," he said.

Pointing out that GST has provided an additional tax of one percent on inter-state trade on goods, by an amendment to further help states in the transition phase, Jaitley said: "Punjab and Haryana will also be levying this additional tax."

States such as Haryana and Punjab have opposed the proposal to subsume purchase tax in GST, arguing that it will lead to revenue losses. Punjab makes over Rs.1,000 crore a year from purchase tax and Haryana rakes in around Rs.600 crore.

Purchase tax is imposed by states on specified items such as foodgrains, while the list of such items varies from state to state. It covers foodgrains, cotton, jute and sugarcane among other primary products.