The 15th Finance Commission headed by Chairman Shri N K Singh, met with the representatives of the Trade and Industry Bodies in Amritsar as part of its 3 days visit to Punjab. The Commission had detailed discussion with the representatives and the State Government Officers.

❖ Contribution of secondary and tertiary sector to the GSVA of Punjab is low as compared to other select General Category States (GCS), indicating limited taxing capacity of the State. 

Sector	Tamil Nadu	Kerala	Maharashtra	Haryana	Punjab
Primary	12.02	13.06	15.33	19.46	29.20
Secondary	34.11	24.35	28.63	30.74	24.57
Tertiary	53.87	62.59	56.04	49.80	46.23

 ❖ Very few big players of Service Sector are currently operating in Punjab and majority of taxpayers of Service Sector are covered under the category of the Micro, Small and Medium Enterprises (MSME).

 ❖ Largest bicycle and its components manufacturing State of the country. Leading manufacturer of Hosiery/Woolen goods which contribute 65% to India’s manufacturing of similar goods.

 ❖ The state ranks 20^th in the ease of doing business ranking with a score of 54.36%. On the other hand, the neighboring Haryana stands at 3^rd rank with a score of 98.06%

Challenges faced by the State: As per the State’s Memorandum:

 ❖ Punjab has a huge disadvantage with its Capital city, Chandigarh, being a Union Territory as other states benefit from the large consumption in its Capital city.

 ❖ Being a border State, neighboring a hostile country, hinders investment in the State.

 ❖ Special industrial incentives package given to Jammu & Kashmir and Himachal Pradesh (both neighboring Punjab) has affected the industrial development in the State immensely.

GST:

❖ The states with metropolitan and other bigger cities have gained disproportionately on account of GST on services, while the states like Punjab, which are primarily agrarian and rural, have heavily lost on this account.

 ❖ Under the VAT regime, states had different rates of taxation depending on the quantum of consumption. The rates of the taxes in the State of Punjab were comparatively on a higher side.

 ❖ Large number of commodities taxed earlier @ 14.30% and @ 15.95% by the State of Punjab, have now under GST, been placed in the tax slab of 6% or 9%, like soft drinks, building material, marble and granite, plywood, furniture etc.

 Recent State Government Initiatives:

❖ Notified the "Industrial & Business Development Policy-2017", a part of its vision to put the State back on high trajectory of growth and prosperity.

 ❖ The Policy is centered around eight core strategic pillars of Infrastructure, Power, Micro, Small and Medium Enterprises (MSME), Ease of Doing Business, Startup & Entrepreneurship, Skill Development, Fiscal & Non-Fiscal Incentives and Stakeholder Engagement supported by sector specific strategies for growth.

GST impact on state revenues reduces Punjab's service-tax receipts, prompting industrial policy and ease-of-doing-business measures. Punjab's limited secondary and tertiary contribution to Gross State Value Added has produced a constrained taxable base dominated by MSME service taxpayers and few large service players; GST reallocations favoring metropolitan states have reduced Punjab's relative service-tax receipts, prompting the State to adopt an Industrial & Business Development Policy-2017 focused on infrastructure, MSME support, ease of doing business, incentives and stakeholder engagement to expand industrial activity and the tax base.