GST Regime And Its Impact On Fiscal Autonomy Of States In India
- IJLLR Journal
- 2 days ago
- 2 min read
Dipti Pal, LL.M. (Constitutional Law), Amity Law School, Lucknow
Dr. Axita Shrivastava, Assistant Professor, Amity Law School, Lucknow
ABSTRACT
The introduction of the Goods and Services Tax (GST) in India on 1 July 2017 marked a significant transformation in the country’s indirect taxation framework. The reform was intended to unify the fragmented tax system by subsuming several central and state taxes into a single, comprehensive tax structure. GST was introduced through the Constitution (One Hundred and First Amendment) Act, 2016, which aimed to simplify taxation, reduce cascading effects, and promote economic integration across the country. However, while GST has improved tax compliance and created a unified market, it has also generated debates regarding its impact on the fiscal autonomy of states within India’s federal structure.
Before the implementation of GST, state governments possessed significant powers to impose various indirect taxes such as Value Added Tax (VAT), entry tax, entertainment tax, and luxury tax. These taxes constituted a substantial share of state revenue and enabled states to exercise financial independence according to their economic priorities. With the implementation of GST, many of these powers were consolidated under a unified tax regime administered jointly by the central and state governments through the GST Council. This institutional arrangement has raised questions regarding the extent to which states retain their fiscal decision-making authority.
The GST Council plays a central role in determining tax rates, exemptions, and policy changes under the GST framework. Although the Council includes representation from both the Union and state governments, concerns have been raised about the potential centralization of fiscal power and the reduced flexibility of states in designing their own taxation policies. The issue became particularly evident during periods of revenue shortfall, when states relied heavily on compensation payments from the central government.
This research paper critically examines the GST regime and its implications for the fiscal autonomy of states in India. The study evaluates the constitutional framework of GST, the functioning of the GST Council, and the revenue challenges experienced by states after the implementation of the new tax system. It also explores whether GST has strengthened cooperative federalism or created new tensions between the centre and states in matters of fiscal governance.
Keywords: Goods and Services Tax, Fiscal Autonomy, Cooperative Federalism, GST Council, State Revenue, Indian Federalism.
