Congress remembers poll promise, Punjab govt to slash tax on non-MSP crops | punjab | Hindustan Times
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Congress remembers poll promise, Punjab govt to slash tax on non-MSP crops

At 6%, Punjab’s purchase tax on crops is the highest among states. While on one hand, the hike has raised the hackles of Central government which will have to shell out more to procure wheat and paddy from Punjab, it has also hit traders and farmers in the state.

punjab Updated: Sep 12, 2017 10:39 IST
Sukhdeep Kaur
High tax rates in Punjab had made non-MSP crops such as cotton uncompetitive as neighbouring states had lower taxes.
High tax rates in Punjab had made non-MSP crops such as cotton uncompetitive as neighbouring states had lower taxes. (HT File )

The Congress manifesto for Punjab polls had promised to boost crop-diversification by lowering state taxes on crops not covered under the minimum support price (MSP) regime.

However, faced with an acute cash crunch, the Captain Amarinder Singh-led government had last month hiked market fee and rural development fee on crops by 1% each, to 3%.

At 6%, Punjab’s purchase tax on crops is the highest among states. While on one hand, the hike has raised the hackles of Central government which will have to shell out more to procure wheat and paddy from Punjab, it has also hit traders and farmers in the state.

It made cotton, basmati and other crops not covered under MSP, uncompetitive owing to lower taxes in neighbouring states, thus defeating the very purpose of the government’s ambitious crop diversification plan.

Already facing wrath of farmer unions which have dubbed the government’s attempt to write off crop loans of 10 lakh marginal and small farmers as “too little, too late”, the state government has decided to forgo the gain from the hike on non-MSP crops.

Speaking to HT, Punjab finance minister Manpreet Badal said, “We had promised to lower taxes to encourage farmers to shift from the wheat-paddy cycle. The market fee and rural development fee will be slashed to make the rates competitive with the neighbouring states.”

While Haryana collects 4% tax on crops, ever since the value-added tax was been subsumed by the Goods and Services Tax (GST) since July, it is 1.6% in Rajasthan and 2.4% in Uttar Pradesh.

Before the hike, Punjab collected Rs 900 crore each as rural development fee and mandi fee. The hike is expected to mop up another Rs 900 crore annually.

The Centre has been opposing Punjab’s high taxes and had earlier refused to pay the infrastructure development cess levied by the state on foodgrains. Even during the last week’s meeting of GST council in Hyderabad, Union finance minister Arun Jaitley brought up the issue of tax hike with Manpreet.

Release GST share on 1st of every month: States to Jaitley

Un­der liq­uid­ity pres­sure af­ter im­ple­ment­ation of the GST, most states have requested Union finance minister Arun Jaitley to release the state’s share in the integrated GST (IGST) on the first day of every month.

Claiming that Punjab was not the only state that failed to pay salaries, Punjab finance minister Manpreet Badal said most states raised the liquidity problem even before the formal agenda of the GST council could be taken up during its meeting in Hyderabad last week.

“While the states had to borrow to pay salaries owing to non-devolution of IGST amount­ing to Rs 37,000 crore, the Centre was flush with funds. They should either pay our share upfront on 1st of every month or on a pro-rata basis, based on state’s GDP, as is the practice followed in Canada,” Manpreet said.

Saying that his state was facing severe cash crisis, Jammu and Kash­mir fi­nance min­is­ter Haseeb Drabu had sug­gested that the IGST credit be lever­aged for in­creas­ing the ways and means limit of states from the Reserve Bank of India.