University- Faculty of Law, University of Delhi (L.C.-II)
The federal character of the Indian Constitution is one of its the salient features however, the term “Federation” has not been incorporated anywhere in the Constitution of India. The Indian Constitution provides for a structure of governance, which is essentially federal in nature.
All the features of a federal state are contained in the Indian constitution, namely: 2 governments, division of powers, a written constitution, supremacy and rigidity of the constitution, independent judiciary and bicameralism. At the same time, it also contains some unitary, non-federal features, for example- the strong Centre, single constitution, single citizenship, integrated judiciary etc. Thus, the federal structure empowers the Centre and the State to legislate and govern on several subjects. Under this structure, the Centre and States have been empowered to levy taxes on goods and services under different indirect tax laws.
The Constitution (One hundred and first Amendment) Act, 2016, introduced the national Goods and Services Tax in India which is considered to be another shining examples of “co-operative federalism”. The proposed structure is synchronized with the constitutional framework of the country, enabling concurrent levy and collection of GST by the Centre and the States. The amendments in the Constitution of India, so carried out are not expected to be impacted by the implementation of GST.
It started with the Centre and States agreeing to have a concurrent power to tax goods and services. The Centre let go of its exclusive power to tax manufacture of goods (i.e. Excise) and provision of services (i.e. Service Tax), and the States gave up their exclusive power to tax sale of goods (sales tax / VAT). Both the Centre and the States agreed to share their powers to achieve uniformity and remove compartmentalization in indirect taxation. The single tax system would help India realize its dream of One Economic India with “One Market”. GST thus shows Unity in Diversity of the Indian Society.
Before the introduction of GST, India was facing the problem of multiple tax zones. This was because of the different rates of VAT in the States coupled with the Central Sales Tax and broken input tax credit chain in inter-state transactions. With the coming of GST, same tax rates will be levied on a particular item on its supply concurrently, both by the Centre and the State. This thereby brings uniformity in tax. In this way, GST subsumes a number of existing indirect taxes which were otherwise being levied upon by the Centre and the State Governments individually. For example: VAT, Service Tax, Central Excise Duty, Luxury Tax etc. GST thus replaces the multiple complicated calculations by one tax with a nationwide common rate on items thus bringing the Centre and the States together for evolving and adopting the new system. This spirit has helped in removal of the compartmentalization of powers of Tax.
The essence of federalism is also reflecting in the composition and functioning of the GST Council. The public good has been achieved because of the mechanism of the Empowered committee of Ministers and then the GST council. The Centre and the States work on the recommendation of the GST Council which comprises of the Union Finance Minister and the Finance Ministers of various states. 2/3rd of the voting rights are conferred by the state while 1/3rd by the Union, thus accommodating within itself the spirit of federalism. Consensus amongst the members has been a guiding principle for taking the decisions in the GST Council in all its decisions. By this way, there has been a harmonization of GST Laws across the country. Even though states have passed and implemented their own GST Acts, they are all based on the Model GST Laws which were formulated together by the Centre and the States. Thus, they are all virtually identical provisions. Similarly, the procedures and formats have been made common for all laws.
The National Academy of Customs, Indirect Taxes and Narcotics (NACIN) also formed a Coordination Committee in each state which consists of the members of the Centre, the State and the NACIN. This committee supervises the capacity building efforts.
From the point of view of empowerment of both the Centre and the State, GST will be administered by the Centre and the State for ensuring that there is ease in doing business. However, the individual tax payers will have a single interface with only one Tax authority, which could either be the Centre or the State. This has been done with the aim of harmonizing and encouraging cooperation in decisions under both the Acts, the officers appointed under the SGST Act or the UGST Act shall be authorized to be the proper Officer for the purpose pf CGST Act and vice versa.
In order to ensure the smooth implementation and roll out of GST, the GST has formed a 3 tier structure, which consists of the Office of Revenue Secretary, a GST implementation committee and eight standing committees. These committees have a representation of the Centre and State Officers which in order to insure quick administrative decisions, before and after the rollout who ensure effective coordination for smooth implementation of GST and this methodology also contains in itself the spirit of cooperative federalism.
As Mr. C. Rajagopalachari said- “You cannot achieve unity of this country without imposing uniformity.” It is important for India to adopt the “One Tax, One Nation” policy. With GST, India can truly transform into a true economic union. The phrase “Unity in Diversity” which has been the hallmark of Indian Society, embraces the diversity in terms of Caste, Creed, Colour, Culture, Customs, Cuisine and Clothing. The new chapter of cooperation has been added within this diversity by implementation of GST through cooperation between Centre and States which economically integrates India and strengthen its unity.
In this manner, GST in India is in its conception, enactment and implementation, an example of real “Co-operative federalism” at work, in tune with the unique character of India- “Unity in Diversity”.
Compiled by GSTstreet for #GSTManthan