Punjab is facing a significant financial setback as its Goods and Services Tax (GST) collections have declined sharply following recent reforms to the national tax structure implemented by the Centre. The state has recorded a 7% dip in revenue mop-up, leading to a shortfall exceeding Rs 500 crore in just three months. This downturn is raising serious concerns about the state's fiscal health, especially with crucial Assembly elections scheduled for 2027.
The Numbers Behind the Decline
The downturn follows the GST Council's decision in September 2025 to simplify the tax regime. The original four major slabs of 5%, 12%, 18%, and 28% were consolidated primarily into two rates: 5% for essential items and 18% as the standard rate. A special 40% rate was also introduced for select "sin" and luxury goods.
While collections showed a healthy 13-14% year-on-year growth until September 2025, the subsequent months revealed a stark reversal. The state witnessed a cumulative loss of Rs 511 crore in October, November, and December 2025. A month-wise breakdown shows a clear downward trend:
- October 2025: Collections at Rs 2,211 crore, down Rs 100 crore from October 2024 (Rs 2,311 crore).
- November 2025: Collections at Rs 2,225 crore, a steep fall of Rs 327 crore from November 2024 (Rs 2,552 crore).
- December 2025: Collections at Rs 1,966 crore, a decline of Rs 84 crore from December 2024 (Rs 2,050 crore).
This contrasts with September 2025, where collections had risen to Rs 2,194 crore from Rs 1,933 crore in September 2024.
Budget Targets at Risk and Political Fallout
The declining trend puts Punjab's budgetary goals in jeopardy. The state government had set an ambitious target of collecting Rs 27,650 crore from GST in the 2025-26 financial year. By the end of November 2025, collections stood at Rs 16,996 crore. Official sources indicate that achieving the remaining Rs 11,000 crore in the last four months of the fiscal year will be extremely challenging if the current trend persists.
State Finance Minister Harpal Cheema has squarely placed the blame on the central government. "This has been done by the Centre. Do not blame the Punjab government for this," Cheema stated. He emphasized that Punjab had been surpassing previous collection records before the reforms. "It is not about Punjab but we are losing money from our kitty. They keep doing something or the other and the states suffer. This is why I have been seeking resumption of GST compensation," he added, highlighting the ongoing tussle for financial resources.
Election Promises and Fiscal Pressure
The revenue shortfall arrives at a politically sensitive time. With the state heading to polls in 2027, the ruling government faces increased pressure to deliver on welfare promises. A key pre-2022 poll promise was a scheme to provide Rs 1,000 per month to women. As 2026-27 will be the government's last full year in office, arranging funds for this scheme becomes critical.
The government's initial plan to generate resources through a land-pooling policy had to be scrapped following massive public protests. It is now exploring alternative measures, including selling government properties—a step previously taken by earlier administrations in the state.
The combination of reduced tax inflows and high-cost welfare commitments sets the stage for a challenging fiscal period for Punjab, with the GST revenue dip becoming a central point of political and economic debate.
