GST rollout was a bit rushed, most states seeking compensation: Punjab FM

Punjab Finance minister Manpreet Singh Badal said that Punjab is discussing whether it can remodel its economy from food grain to food industrialisation economy

There are certain flaws in the goods and services tax that are being rectified now, said Punjab Finance minister Manpreet Singh Badal. He told Dilasha Seth that the state was unaware of the extent of losses due to GST. He added that Punjab is discussing whether it can remodel its economy from food grain to food industrialisation economy as pre-GST food grains were taxed and made up for 40 per cent of the tax base.

Most states are facing a revenue shortfall due to GST. Is it in line with the initial expectations?

Besides one or two states, most states are seeking compensation. Punjab has requested the Council if the chief economic adviser could do a study because the thing Punjab wants is be compensated for something. We were led to believe that Punjab is a huge consuming state and it is a win-win situation. We were not aware of what the kind of losses could be. We were hoping that we would be able to cross the 14 per cent threshold. But that is not the case with most states. There are certain flaws in GST. We are trying to rectify it. My own feeling is, the roll-out was a bit rushed and hurried. The Congress model which was presented in 2011 was a far more idealistic model than what the BJP has come out with.

What is your take on the recommendation made by Infosys chairman Nandan Nilekani on invoice matching?

It seemed quite workable. It is better than what we have today. The states will discuss it with the stakeholders and get back over whether this is workable or not through a video conference. The onus of matching returns should not be with the government but on the buyer and seller and we should not be acting as a policeman on that. So if someone wants input tax credit, then the returns should match.

How is Punjab dealing with the revenue losses post GST?

We used to tax our food-grains and that has been subsumed under GST. So 40 per cent of our tax base is off. We are worried about five years hence when the Centre won’t give compensation for the shortfall. We are thinking whether we can recover or remodel our economy from food grain to food industrialization economy.

Was there a specific recommendation you made in the pre-budget consultation with the FM? 

Most states would like FRBM to be relaxed from 3 per cent of GDP to 3.5 per cent. The Congress has also pressed that petroleum and real estate should be brought under GST. The chairman agreed that in the next meeting it would form part of the agenda. If you stick to the principle of one-nation-one-tax, then this part of the economy cannot be left out.

The E-way bill is proposed to be implemented from February 1. How prepared are you? 

The e-way bill will indeed be implemented from February 1. We asked for relaxation of penalty clauses initially so that the business is not affected. The penalties should not be harsh which will affect trade and bring negativity. So for the first month of implementation, there should be no penalty. Once the process smoothens, action can be decided.