Centre should address States’ concern on GST transfers

Prelims level : Economy / Polity & Governance – Taxation / Supreme Court Mains level : GS III - Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
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While the Goods and Services Tax (GST) Council was designed as a federal body between the States and the Centre, the complaint of the States is that the Centre is taking advantage of the arrangement and is delaying the dues to be paid to the States longer than is needed. 


Though Indian states have achieved Political Integration in 1950’s with the integration of Princely states in Indian Union, economic Integration was still missing. Passing of GST is a shining example of cooperative federalism where States and Centre have ceded their power to tax and come up with a single tax system to realize the dream of one Economic India with ‘One Market’. Thus, GST once again has shown Unity in Diversity of Indian Society. However, Economic integration is still not achieved as Constitution needs some changes in this regard.

GST: a shining example of Cooperative federalism

In our Federal System both Centre and States have power to impose taxes. The division of such taxation powers is given in Union and State List under 7th Schedule. With the spirit of cooperative federalism, under GST, both Centre and States have given up taxation powers and as a product following taxes have been eliminated.

The Constitution of India has also been amended accordingly. This fundamental reordering of federal fiscal relations for the cause of common good shows the strength and resolve of the federal structure.

This convergence for the cause of larger public good has been made possible, initially due to the mechanism of the Empowered Committee of Ministers (EC) and later the GST Council. Under the GST regime, the Centre & States will act on the recommendations of the GST Council. GST Council comprises of the Union Finance Minister, Union Minister of State for Finance and all Finance Ministers of the States. 2/3rd of voting power is with the States and 1/3rd with the Centre which reflects the accommodative spirit of federalism.

Though the Constitution provides for decisions being taken by a 3/4th majority of members present and voting, all decisions till now (before july, 1, 2017) have been taken unanimously by consensus. The very fact that there has been no need to resort to voting to take any decisions taken till now in 18 meetings held so far reflects the spirit of “One Nation, One Aspiration, One Determination”. In this context it is important to note that credit for the new law does not go to one party or one government but it’s a shared legacy of all.

The participation of all States and Centre in the framing of GST laws has led to the following features in the GST Laws. These features signify spirit of cooperative federalism.

  • Harmonisation of GST laws across the country: Even though Centre and each State legislature have passed their own GST Acts, they are all based on the Model GST law drafted jointly by the Centre & the States. Consequently, all the laws have virtually identical provisions.
  • Common Definitions: There are common definitions in the CGST and SGST Act.
  • Common Procedures / Formats:There are common procedures; common formats in all laws, even the sections and subsections in CGST Act and SGST Act are same. UTGST Act provides that most of the provisions in CGST Act, as stated in Section 21 shall apply to UTGST Act also.
  • Common Compliance Mechanism: GSTN, a not-for-profit, non-government company promoted jointly by the Central and State Governments, is the common compliance portal and the taxpayers shall interface with all states as well as Centre through this portal.
    Other significant areas, where such co-operation has been displayed by the Centre and States are as under:
  • Joint Capacity Building Efforts: Joint Capacity Building efforts by Centre as well as all the States are being organised wherein for the first time the training of officers of Centre and State is being conducted under the auspices of National Academy of Customs, Indirect Taxes and Narcotics (NACIN). NACIN has formed a Joint Coordination Committee in each State comprising of Centre, State and NACIN Officers for overseeing Capacity Building efforts.
  • Joint Trade Awareness & Outreach Efforts: Centre along with the State Government Officials has been organising Joint Trade Awareness & Outreach programs wherein for the first time the Officers came together to create GST awareness amongst Trade and other stakeholders.
  • Cross Empowerment of Officers of Centre as well as States:Though GST will be jointly administered by Centre and State, for ensuring ease of doing business, but the individual taxpayer will have a single interface with only one Tax Authority either Centre or State.
  • Joint Implementation Committees: In order to ensure smooth rollout of GST, the GST Council has formed a three tier structure consisting of: the Office of the Revenue Secretary, GST Implementation Committee (GIC) and eight Standing Committees. In addition, eighteen Sectoral Groups representing various sectors of the economy have been set up. All these Committees viz. GST Implementation Committee (GIC), Standing Committees and Sectoral Groups have representation of Centre and State Officers in the spirit of cooperative federalism to ensure quick administrative decisions required before and after the rollout and ensure effective coordination for smooth implementation of GST.
    Indeed, GST in India in its conception, enactment and implementation is an example of real ‘co-operative federalism’ at work, in tune with the unique character of India – ‘Unity in Diversity’.

Economic Integration

Under GST regime the entire country will become one market and it will be an economic integration of India. India would become one uniform market with seamless transfer of goods and services.

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