Janvi | Apr 29, 2025 |
Haryana Pushes for GST Revenue Loss Compensation
Haryana met with the 16th Finance Commission today to discuss how tax money should be shared between the central government and states. They made a new proposal: states should be compensated for money they lost after GST was introduced.
Finance Commission Chairman Dr. Arvind Panagariya said that Haryana wishes this new parameter to account for 15% while determining how to distribute taxes. He added that states like Maharashtra and Gujarat also have such concerns, while Tamil Nadu desires consideration of states’ contribution to GDP.
Haryana, along with several other states, wants to increase the states’ overall share of taxes from 41% to 50%. They also suggested major changes to how money is distributed among different states:
Tax Collection Efforts: Haryana wants to greatly increase the importance of how well states collect taxes, from 2.5% to 35%. Dr. Panagariya explained that this rewards efficient tax collection.
Income Differences: Currently, poorer states get more money based on income differences (45% importance). Haryana wants to reduce this to just 15% since the current system benefits states like Bihar and UP more than Haryana.
Population and Area: Haryana suggested reducing the importance of population from 15% to 7.5%, while keeping area-based distribution at 15%.
Forest Cover: Since Haryana doesn’t have much forest land, it wants to reduce the importance of forest coverage from 10% to 5%.
Chief Minister Nayab Singh Saini also recommended that two new elements must be taken into account while distributing taxes: Haryana’s contribution to the National Capital Region (NCR) and the large number of Haryana citizens in the armed forces.
The Finance Commission has asked Haryana for more details on how its GST compensation proposal could work in practice. These discussions will help shape how government money is distributed across Indian states in the coming years.
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