Touted as India’s most radical tax reform since liberalism in 1991, the Indian GST regime intends to subsume almost all the previous central and state indirect taxes into it, thereby relieving the households and investors of the complicated tax regime. In addition to being predicted to be fruitful for the Indian economy and common man in the long run, with the benefits ranging from elimination of cascading effects to reduction in the debt-to-GDP ratio of our country, it is pointed out that this system will be an epitome of cooperative federalism practised in our country.
Cooperative federalism is a type of federalism where national and state governments, rather than working separately, interact cooperatively and collectively to solve common problems. The fact that our country has a cooperative federal structure can be traced from the decisions of judiciary in numerous cases. In State of Rajasthan v UOI, while citing Granville Austin, the court held that Constitution of India was perhaps the first constituent body to embrace cooperative federalism (a term promoted by A.H.Birch). Justice Beg held that our Constitution is amphibian in the sense that it can move either on the federal or on the unitary plane, according to the needs. Similarly, in S.R.Bommai v Union of India, Justice Ahmadi observed that, the Indian Constitution has, in it, features of a pragmatic federalism which while distributing legislative powers and indicating the spheres of governmental powers of state and central government, is overlaid by strong unitary features.”
In order to counter the cessation tendency of states, the framers of our constitution anticipated a need for strong Union and therefore outlined the constitution in a way by which the dominant power was relegated to the central government. Nevertheless, keeping in mind that the progress of all regions in a vast and diverse country like ours, needs concerted efforts of the centre and states, adequate powers were also bestowed on the state governments.
But, until the introduction of GST by the 101 st Amendment Act, there was no economic integration in our country. Under our previous taxation system, besides the progressive direct taxes, people had to bear the burden of the regressive indirect taxes imposed by central and state governments as per the powers assigned to them under the 7th Schedule of our Constitution. With the spirit of cooperative federalism, both these governments have now given up their powers in relation to indirect taxes.
The critics of this system allege that the waving of these powers will be an assault on the federal structure of India. But this argument is not based on factual points. Respecting the vision of the framers of our constitution, the GST Bill has been drafted so as to equally involve the state governments in the decision making process.
A dual GST has been framed keeping in with the salient feature of division of powers between the central and state government. Under the newly added Article 246A concurrent powers have been conferred on both the levels of government, in order to make laws regarding intrastate trade and commerce.
Although there is provision for the centre and states to pass their own GST laws (CGST and SGST respectively), they are to be based on a Model GST which is framed jointly by the centre and the states. This results in creation of GST laws which are virtually identical in nature.
Moreover, there is inclusion of common procedures and formats in the CGST Act and the SGST Acts. As regards the UTGST Act, sec 21 of the Act states that most of the provisions of CGST Act will also apply to it.
Both the governments are required to act on the recommendation of GST council– comprising of the Union Finance Minister, Minister of State Revenue and all the State Finance Ministers. With the lion’s share of voting i.e.2/3 rd of voting rights remaining with the states the centre is barred from undermining the financial autonomy of majority of states.
Further a non-profit non-governmental organisation, namely Goods and Service Tax Network, has been set up, to provide a shared IT infrastructure to the central and the state governments, taxpayers and other stakeholders for implementation of GST. This portal will serve as an interface between the government and taxpayers.
Besides the above-mentioned provisions which dub GST as an attribute of cooperative federalism, the joint efforts undertaken by the centre and states for the proper implementation of GST also display that this reform is a step towards integrating our country.
Joint Capacity Building efforts by Centre as well as all the States are being organised, to train the indirect tax officials of both Centre and State, on the concepts, processes and procedures of GST. The training has been mandated to be imparted by National Academy of Customs, Indirect Taxes and Narcotics (NACIN). In order to oversee the capacity building efforts, NACIN has formed a Joint Coordination Committee in each State comprising of Centre, State and NACIN officials. Likewise, as a new initiative, joint trade awareness and outreach programme are organised by the Central and State governments to create GST awareness among trade and other stakeholders. In addition, the GST Council has formed a three tier structure consisting of: the Office of the Revenue Secretary, GST Implementation Committee and eight Standing Committees consisting of Centre and state officers to ensure smooth and effective implementation of GST after the rollout.
Though the motto of “ONE NATION, ONE TAX” has not been fulfilled in true sense due to the exemption of goods like alcohol and petroleum products from the purview of GST, the fiscal integration induced by it will not only boost economic growth but also help the nation realise its concept of “unity in diversity”. The materialization of this idea wouldn’t have been possible but for the display of cooperative spirit by centre and states. Thus, the Indian GST in its initiation, enactment and implementation can be considered as a new feather to the cap of our country since it strengthens cooperative federalism.
Compiled by GSTstreet for #GSTManthan