GST Council and State Autonomy by Ganesh Aravindh S.

Ganesh Aravindh S.
 SASTRA University, Thirumalaisamudram, Thanjavur

The interconnection between the GST Council and fiscal autonomy of States in the Indian fiscal framework has to be discerned from the vantage point of the practical ramifications that stem from the 101st Amendment Act. The scrutiny of state autonomy after the origination of GST has always been viewed from the standpoint of what has been divested rather than what has been proffered. This essay is an attempt to meticulously examine state autonomy, the fetters placed on the same and the importance it holds. Moreover, an endeavour is also made to identify potential problems in the Indian characterization of GST in light of the methodology adopted in Canada (the brainchild behind the Indian GST and the only other comparable country that administers dual GST).

The first crucial question that arises is whether the definition of ‘supply’ is a matter of constitutional intent or statutory embodiment. Moreover, the absence of a model SGST Act that State Legislatures have to abide by also opens the gates for any probable dissimilarities in SGST laws. Secondly, Art.269A which provides for the formation of the GST Council, a Constitutional Body asserts that the recommendations of the Council are not mandatory. This Constitutional proclamation is intelligible in view of the federal arrangements it proposes to preserve and the state’s autonomy it wishes to leave untouched. With the recommendations of the Council having no Constitutional authority or a binding force of its own and an adjudication mechanism unparalleled in the history of Constitutional Bodies, one begins to wonder if the non-binding decision could force compliance. In addition to it, the aforesaid provisions would be repugnant to the provisions of Art.131 of the Constitution which declares that the Supreme Court would have exclusive jurisdiction in disputes involving states and the Centre. It also gives way to an another fundamental question as to whether the establishment of an adjudication mechanism as part of Art.279A to decide disputes between the state and the Centre or amongst the States and restricting the jurisdiction of Art.131 is sustainable and is made with a specific objective to not award decisions in relation to the aforementioned disputes the authority of law under Art.141 of the Constitution.

Understanding the Canadian GST Model, the basis of the Indian GST:

The Canadian model envisages both the federal and provincial governments to tax sales tax. It is coordinated by the federal government by having an administrative agreement in order to concur with each other. Government of Canada has also retained some of the key legislative powers as under the matters related to GST and other policy matters. Furthermore, the various agreements like CITCA (Comprehensive Integrated Tax Coordination Agreements), and HST (Harmonized Sales Tax) harmonize the tax rate and ensure consistency in the matter and manner of the imposition. The following are the stark differences between the Indian Model and the Canadian Model:

1. The Tax Policy Review Committee, which is responsible for the analysis and assessment of issues regarding legislation and administration of the HST is chaired by the Government of Canada as against the federal-democratic setup of the GST Council which comprises both Central and State representatives.

2. The tax base on which the provincial and the federal portion of the HST are applied is the same. Any change that the provincial governments propose must be brought to the notice of the Tax Policy Review Committee. However, the 101st Constitutional Amendment does not mandate any reference to the Council of issues confronting fiscal interests of States and also provides scope for unilateral modification of the State GST Law.

3. The HST is administered by the Federal Government and the provincial portion of the same is remitted to the provinces by the federal government. The responsibility to administer HST is entrusted solely with the Canada Revenue Agency (CRA), a bureau of the federal government. Contrastingly, the Indian GST has 29 States administering SGST and the Centre administering CGST and IGST providing tremendous scope for heterogeneity.

4. Moreover, in the Canadian tax coordination system, any change in tax rate is to be effected by the provinces simultaneously[1]. On the other hand, in the Indian Model, the State seem to have ample leeway to materially amend their respective SGST rates and also laws.

5. The distribution and sharing of tax revenue between provinces is effectuated by virtue of a formula predicated on data accumulated by CRA and consequently remitted to the provinces.[2] The Canadian Model, despite envisaging a dual GST is administered only by a federal agency resulting in the avoidance of provincial intervention or involvement. Nevertheless, it also offers a reasonable opportunity and role to the provinces in maintaining and improving their individual interests. Such power to revise the taxation policy can by no stretch of imagination be termed a legislative power but only an instrument to summon and convene the federation to evaluate and approve the proposal. Contrastingly, the Indian framework endows them with exercisable Constitutional power without any mandatory authorization or sanction.


The Indian GST is expected to harmonize the revenue relationship between the Centre and State. However the present model appears to confer untrammelled power to the State legislature with regard to SGST and is formidably greater than the autonomy granted to the Canadian Provinces. The system of fiscal federalism would only be an optimal solution to a country which is perfectly federal and whether India is one such nation remains to be seen. The decentralisation in India is an abnegation of the Parliament’s political power in contradistinction to Canada where the federation has no major limitation while imposing tax. Moreover, the Indian Model gives the impression of an outlandish system with adoptions in part made from the Canadian system. It remains to be seen if the borrowed system would suffice the competing needs of the nation.

[1] Supra note 1, at  p. 184

[2] Ibid, at p. 185

Compiled by GSTstreet for #GSTManthan

View Comments (3)

  • Learned author's attention is invited to his apprehension on probable dissimilarities in various States SGST Acts in absence of model SGST law. It is seen from various States SGST Acts placed in website that the States laws are made in line with provisions of the CGST Act,2017 passed by the Parliament. All the States GST Act have 174 Sections as is the case with CGST Act. Therefore, it can be stated that CGST Act acts like a model law which is adopted by the States with necessary changes.

  • The absence of a model law denotes the lack of fetters placed on the legislative power of States. Merely because the CGST and the SGST laws are substantially similar at the present is no guarantee that the state of affairs would continue to be the same in the future. Moreover, there is no provision in the CGST Act that the State Laws are to abide by the CGST Act. Even the amendments made to the Constitution do not state that. So, there are no binding limitations. Hence, there is a realistic possibility of SGST Act becoming dissimilar in the future, perhaps after the 5 year compensation period. Finally, the reason why the laws are similar presently is due to the inculcated sense of cooperative federalism, the success of which is reliant of dominant political presence, lobbying and similarity in political ideologies.Thus, one can be sure that politics is going to play a humongous role.

    • Sir,
      Please see Section 9 of CGST Act and Section 9 of TNSGST. The levy of tax is done on the recommendations of GST Council created in terms of Article 279A. Therefore, States may not make laws of their own without the consent of GST Council. Further Section 6 of CGST Act empowers State officers to administer Central Act and similarly Section 6 of State laws empower Central Tax officers to administer States laws with regard to monitoring tax payment by a registrant in their jurisdiction.



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