Advocate Harpal Singh Cheema, the Finance Minister of Punjab, has urged the central government to ensure that states receive sufficient compensation as part of the proposed changes to Goods and Services Tax (GST) rates. He highlighted the necessity for these adjustments to benefit the economically disadvantaged, rather than corporate entities, especially in light of rising inflation.

Cheema warned that implementing the current proposal for price adjustments without a compensation mechanism could destabilize state finances and undermine the federal structure of the nation, which he deemed unacceptable.

During a significant meeting focused on GST rate rationalization, attended by finance ministers and representatives from various states including Karnataka, Himachal Pradesh, Jharkhand, West Bengal, Kerala, and Telangana, Cheema emphasized that any rate changes should be backed by a strong revenue protection framework. This balanced approach is essential to safeguard the fiscal autonomy of states while promoting the goals of GST reform in a cooperative federalism spirit.

The Punjab Finance Minister pointed out that since the GST was introduced in July 2017, the principle of revenue neutrality was central to its design. However, states have experienced considerable revenue losses post-implementation. He noted that Punjab alone has suffered a financial setback of approximately ₹1.11 lakh crore, despite receiving ₹60,000 crore when the compensation cess was active. To date, the central government has not addressed the remaining loss of ₹50,000 crore owed to Punjab.

In discussions with the media, Cheema mentioned that the states collectively advocated for an additional tax on luxury and sin goods to maintain current taxation levels. The revenue generated from this should be fully allocated to the states to alleviate their fiscal stress and restore their financial autonomy.

Cheema stressed that without revenue stabilization, states would struggle to fulfill their constitutional responsibilities regarding social welfare. He cautioned against the central government shifting financial burdens onto states while retaining revenues. A financially robust state is crucial for strengthening the nation, and thus, the revenue interests of all states must be safeguarded through a solid mechanism.

Regarding the recent floods, Cheema called on the central government to assist Punjab during this crisis. He assured that the Punjab government is diligently working to support its citizens during these challenging times and plans to request a special financial package from the center after assessing the damage.