GST Collections: Udta Punjab falls behind Rising Haryana

By: Niyati Sareen

“Udta” or not, even GST collections reveal how Punjab is significantly falling behind Haryana in the economic race. The disparity between their per capita GSDP for the Fiscal Year 2023-24 highlights a 2% growth difference and underscores Haryana’s stronger economic growth and GST revenue.

The introduction of GST has not only unified the indirect taxation system but also given us interesting insights into different aspects of the national economy. For instance, compare the GST collections of two northern Indian states of Punjab and Haryana. Both are very similar and were once a single state. But the GST collections bring out the differential trajectories on which these states have moved, and the growing economic gap between them. Both Punjab and Haryana have seen the highest growth rates in GST revenue with their collection rising by 21% in 2024 as compared to the previous year. However, Punjab’s GST collection remains significantly lower in absolute terms in contrast with Haryana with almost a fourfold gap between the two states.  

While Punjab’s GST revenue is Rs. 2,796 crores as of April 2024, Haryana has zoomed to Rs. 12,168 crores. The biggest factor contributing to this gap is Haryana’s growing industrial base and infrastructure development. Amongst the states surrounding the NCT Delhi, according to Haryana Town and Country Planning Department, Haryana is said to be the most urbanized and is currently one of the largest hubs for major industries, particularly the automobile manufacturing sector. A major growth center, home to a city like Gurgaon which has emerged as a major corporate and IT base, Haryana has attracted a large population of the middle class. A domain for MNCs due to its advanced infrastructure, and proximity to Delhi, Gurgaon contributes around 40% of Haryana's GST revenue. This has created a favorable environment for business to thrive and further increased investment and consumption, thereby increasing the GST revenue collected. Although Punjab used to be one of the richest and most prosperous states in India, it is now one of the slowest growing states characterized by major deindustrialization. Lack of diversity in industries with major reliance on textiles coupled with absence of efficient infrastructure and road connectivity has resulted in its lower GST revenue, especially since the industrial sector is the highest-paying tax sector in India.  

Punjab is heavily dependent on agriculture for its economic growth, which contributes to 27% of the state's GDP as of 2023-24. This falls under the sector-specific exemption feature which states that, “necessities like food and grains are, either exempted from GST or have reduced tax rates to ensure affordability and accessibility” thus leading to a lower revenue collection from this sector. Punjab has allocated 10.1% of its expenditure towards agriculture in the 2024-25 budget, taking away resources which can be used for the growth of industries and infrastructure. This is significantly higher than the average allocation towards agriculture by states which is around 5.9%. In comparison, Haryana has only allocated 5.3% of its total expenditure towards agriculture and only around 18% of Haryana’s GDP is derived from the agricultural sector, contributing to a much lower loss in GST revenue from this state. 

Additionally per capita income is another important component which should be considered while analyzing the revenue difference between the two states. Since it is the amount of money earned by every person in a particular state, the higher the per capita income, the higher will be an individual's disposable income and consequently their spending on goods and services will increase. Since GST is a consumption-based tax, increase in levels of consumption directly lead to higher GST collections. According to the Haryana Budget Analysis, the state's per capita GSDP for the year 2023-24 is estimated at Rs 3,25,759. Conversely Punjab’s per capita for the same year is estimated at Rs 1,95,621. This notable margin highlights the economic disparity between the states, contributing to a growth difference of 2% in their overall Gross State Domestic Product.