Cooperative federalism

Source: Business standard

Context

Supreme Court Bench said that the recommendations of the Goods and Services Tax (GST) Council were not binding on the Central and State governments.

The court further noted Parliament and the state legislatures had the powers to legislate on issues related to GST.

The judgment underscores the nature of the Indian federal structure and the need for cooperation.
The implementation of GST is the finest example of cooperative federalism.
Both the Centre and the states pooled their powers to tax goods and services to attain the idea of "one country one tax".
Different levels of taxes are inherently inefficient for business for states.
The council resolves the differences between the Centre and the states.
The biggest challenge for Council is to address the rise in revenue.
With the completion of five years of implementation, the states from July 1 will not be eligible for compensation against revenue shortfall.
The rationalisation of rates to improve revenue collection will be implemented soon by the Council.

Image courtesy: The Hindu

The apex court upheld the Gujarat High Court's ruling that integrated GST (IGST) cannot be imposed on Ocean Freight.
Any legislative gap in this context was addressed after a discussion in the council.
Parliament has the power to make laws in the case of IGST.

GST Council shall make recommendations to the Union and states regarding various aspects of the tax.
It will be guided by the need for a harmonised structure of goods and services tax and the development of a harmonised national market for goods and services.

Empowers the legislature of every state to make laws in the context of goods and services.
The Council to determine the procedure in the performance of its functions.
If gaps emerge in the functioning of GST, which is always a possibility as the system matures, the Council is in a position to plug them.

GST Council

It is a constitutional body under Article 279A.
It was introduced by the Constitution (One Hundred and First Amendment) Act,2016.
To make recommendations to the Union and State Government on issues related to Goods and Service Tax.
The Council is Chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in charge of Finance or Taxation of all the states.
It is considered a federal body due to the representation of both centre and the states.

The law gives two-thirds of the weighted votes to the states while one-third is to the Centre.
All states are part of the process in the Council, there is a principle, no reason for some states to act differently.
Besides, the Council need to develop a harmonised market.

The Centre make sure that the concerns of all states are addressed.
It also shows that levies and provisions can be successfully challenged.
The Centre and the Council must make sure that taxes are imposed strictly by the law.

Share to Social