CREATION OF GST COUNCIL AND ITS IMPACT OF FISCAL AUTONOMY OF THE STATES
AUTHOR – PRIYASRI.B & RAJARAJESHVARI R.S, STUDENTS AT SCHOOL OF EXCELLENCE IN LAW
BEST CITATION – PRIYASRI.B & RAJARAJESHVARI R.S, CREATION OF GST COUNCIL AND ITS IMPACT OF FISCAL AUTONOMY OF THE STATES, ILE CONSTITUTIONAL REVIEW, 3 (1) of 2024, Pg. 28-42, APIS – 3920 – 0006 | ISSN – 2583-7168.
Abstract
The Goods and Services Tax (GST) is a key fiscal policy tool used by several countries, including India, to streamline the taxation structure. The adoption of GST resulted in a ‘one nation, one tax’ system by replacing a multi-layered, complex indirect tax structure with a simplified, transparent, technology-driven tax regime. The new indirect tax had a multiplier effect on the economy, with gains going to exporters, small traders and entrepreneurs, farmers and industry, and regular consumers. The creation of GST Council through 101st constitution Amendment in India symbolize a landmark transformation in fiscal federalism of the country. This revolutionary tax reform emphasizes the delicate balance between centralization and decentralization in the government framework, posing both problems and opportunities for the country’s cooperative federal system. Further, GST increases transparency and accountability in tax administration, lowering tax evasion and enabling more efficient resource allocation, which benefits all levels of government. This research delves into the creation GST Council and it’s impact on fiscal relationship between Center and state by combining multi-layered indirect tax structure into single GST regime. The structure of GST Council which includes both central and state representatives, represents a cooperative approach to federalism, ensuring that states have a strong input in tax choices. Additionally, this study explores the fiscal federalism of states both pre and post GST introduction. Prior to the introduction of GST, State cannot tax services and Centre cannot impose sales tax. The 101st constitutional amendment redefined the autonomy aiming for more balanced and Integrated fiscal environment. However, This transformation also poses certain challenges. Almost all State express their concern about potential erosion of fiscal autonomy due to inability to set rates based on their fiscal needs, inability to accommodate diverse fiscal requirements, and concerns about inadequate central compensation. Ultimately, the research aims to provide complete evaluation of role of the GST council in promoting cooperative federalism in India.
Keywords: Goods and services tax, fiscal autonomy, cooperative federalism, transparency, decentralization