Punjab Finance Minister Harpal Singh Cheema, at the 54th GST Council meeting, made a strong case for compensating states facing revenue losses due to the implementation of the Goods and Services Tax (GST) regime. At the same time, Cheema also passionately called for exempting research grants from GST, emphasizing that education is a top priority for the Punjab Government.
Cheema, addressing the Council, outlined how Punjab’s effective taxation rate has significantly decreased since the introduction of GST, leaving the state unable to offset the losses due to the centralized tax system. The Finance Minister highlighted that industries in Punjab produce goods that are consumed in other states, leading to lower Integrated GST (IGST) settlements for the state. Given this, Cheema urged the GST Council to explore mechanisms to compensate states that have seen revenue declines. The Council acknowledged his concerns and assured that appropriate steps would be taken.
In a significant win for Punjab, Cheema’s advocacy for exempting research grants from the GST net was well-received. The Council agreed to exempt research grants — including private grants to government institutions, universities, colleges, and research organizations — citing the importance of promoting education and innovation.
Cheema also supported the Council’s decision to impose a reverse charge mechanism (RCM) on metal scrap, with the buyer responsible for paying GST. However, he recommended that the RCM rate be reduced to five percent, a suggestion the Council agreed to consider further.
Additionally, the Finance Minister called for reducing or exempting GST on health and term insurance premiums, noting the financial relief it would provide to the common people. Although consensus was not reached on this issue, the Council decided to form a Group of Ministers (GoM) to study the proposal and submit a report by October 2024.
One of the key issues raised by Cheema was the negative balance in Punjab’s IGST ledger, which had led to recoveries from the state. He requested the formation of a committee to assess the causes of these negative balances, a suggestion that the Council accepted. In another positive outcome, the Council granted Cheema’s request to exempt ancillary services related to the transmission and distribution of electricity from GST, both prospectively and for the past periods.
Cheema also proposed implementing a Reverse Charge Mechanism for commercial properties to streamline tax collection and improve compliance, a recommendation that was accepted unanimously. Furthermore, he suggested reducing the timeframe for submitting bank account details after GST registration from 30 to 15 days, to deter fraudulent registrations while ensuring genuine taxpayers are protected. The Council agreed to consider this proposal.
Demonstrating Punjab’s commitment to enhance tax compliance, the state volunteered to pilot a Business-to-Consumer e-invoicing project. This initiative is aimed at improving transparency and tax collection, positioning Punjab as a leader in adopting innovative tax measures.
In a separate development, the GST Council discussed the establishment of GST Appellate Tribunals across the country. Punjab’s proposal to change the location of the principal bench to Chandigarh, with an additional bench in Jalandhar, was accepted by the Council, marking a significant step forward in ensuring greater access to justice for taxpayers in the region.
