Chandigarh/New Delhi, August 29 –Punjab Finance Minister Advocate Harpal Singh Cheema on Friday urged the Central Government to ensure adequate compensation to states before implementing the proposed rationalization of GST rates, warning that otherwise the move would undermine financial stability and hurt the federal structure of the country.
Cheema, who joined Finance Ministers and representatives of Kerala, Karnataka, Himachal Pradesh, Jharkhand, West Bengal and Telangana at a meeting in Karnataka Bhavan, New Delhi, said that any GST reforms must be accompanied by a mechanism that safeguards the fiscal autonomy of states. “The benefit of rationalization should reach the poor battling inflation, not corporate entities,” he said.
The minister argued that states cannot shoulder the revenue shortfall alone. “If implemented without provision for compensation, the proposal will destabilize state finances. A balanced approach with safeguards is the only way to protect the economic sovereignty of states,” Cheema noted.
Punjab’s finance chief proposed that an additional levy on luxury and special goods be imposed to fill the revenue gap. He demanded a compensation mechanism lasting at least five years, with provisions to extend it if the shortfall persists. “Without revenue stability, how can states fulfill their constitutional responsibilities for public welfare? If the states are financially strong, the country will also be strong,” he said.
Cheema pointed out that since the introduction of GST in 2017, Punjab alone has suffered a financial loss of nearly ₹1.11 lakh crore. While the Centre released about ₹60,000 crore as compensation during the initial years, he said, no mechanism has been devised to address the continuing shortfall.
He also underlined that states had implemented GST on the principle of fiscal neutrality, but “the Centre cannot shift the entire burden onto the shoulders of states while concentrating revenue sources at the central level.”
Responding to questions on the recent floods in Punjab, Cheema said the state government is standing firmly with the affected people. He added that once the damage is fully assessed, Punjab will seek a special relief package from the Centre. “The Union Government must come forward to help in this natural disaster,” he said.
