Implications of COVID-19 on the Revenue of Punjab Under GST Regime

Punjab has a wide gap between its expenditure and revenue receipts. COVID-19 has further worsened the situation with increasing need for public spending, while the revenue is contracting substantially. The introduction of GST though has resulted in loss of fiscal autonomy for the state of Punjab by 18.1 percentage points of its revenue resources. The co-operative federalism trust with which the GST concept was introduced has taken a major hit after the Centre has gone back on several of its commitments as the shortfall in SGST revenue collection is likely to cross Rs 3 lakh crore during FY21. Some amicable solution, however, may now be found out with the latest proposal of the Centre to borrow Rs 1.10 lakh crore, which it will pass on to the states as a back-to-back loan. With several such unexpected problems surfacing on the SGST front and depleting trust between the centre and states, the problem for Punjab has compounded as the revenue of the state from its own resources is also not growing. There is, thus, urgent need for the state to look for viable alternative revenue options to remain prepared for medium to long-term scenario. The various state Governments’ give several unnecessary doles in the form of SGST refund with the objective to attract the investment in the state, but this defeats the very purpose of one nation one market. Not sure why the Centre is looking the other way in such cases and instead of passing laws related to matter primarily classified as the state subject, for example, by passing agriculture ‘mandi’ tax.