According to 101 Indian Constitution Amendment Act GST was presented as single form of Indirect tax on all the goods and services within the Country. With GST implementation the power of state government is subsequently reduced to charge any extra form of taxes on good and services. In case of any Income shortage to the States, Central Government has promised to pay the remaining amount to fulfill their targets.
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| Federalism and GST |
Centre Government to assist States by giving GST Compensation strengthening Fiscal Federalism
Unfortunately, Central Government denied to pay any remuneration just opposite to what they said before GST Implementation. This has caused huge burden on the States and that too in the pandemic situation where medical supplies and demands are high. This had lead to clash between the Central and State Government adding every pandemic burden has to be seen by states. The only option left to them is to take loans.
Pandemic has highlighted multiple areas for states to focus on like unemployed people, migrant workers, medical facilities and demands, to tackle with job losses etc. In such time centre has asked states to arrange cash for themselves by taking loans from RBI and other available sources. Adding to this GST compensation as promised by the government is upto 2022, and State Government has demanded to extend this period has they are out of cash. In such situation government can take following decisions like:-
1) Under Sub Clause 4(f) of Article 279 Central Government can give loans on very less interest rates during this pandemic situation. It can assist states to proceed with government assistance programs and schemes.
2) Also they can help State Government by allowing them not to pay tax under GST system this year. This will help to lessen their burden of low revenue due to COVID-19.
The basic structure of the constitution provides federal relationship between union and the state government. However, with the denial of rumuneration by the central government this will violate the basic structure and also develop distrust between both the government's. However, we should keep in mind that taxes from Petroleum and Alcohol doesn't comes and GST and States are still getting extra money from this products by charging extra tax.
From The Different State Government's Point of View
State Governments are saying that under Goods and Services Tax 2017, Union government is liable for the shortage of revenue collected by different states and they will pay for it for a period of 5 years from 2017 to 2022 keeping 2016 as base year and adding 14% extra remuneration each year on the net income. However, many experts says that 14% is much high and it should be kept under 5 percent keeping the pandemic situation in view.
With the shortage of revenue salaries of many employees is either reduced or delayed effecting their lives as well. More focus is given to the medical sector and lockdown has effected the government's source of income. Ultimately, it is the state government which is under extreme pressure and they have to tackle it by themselves with very little help from the centre.
After immense pressure from the States, central govt paid very low amount under GST remuneration to the states and advised them that they can take loans from the market with certain conditions. The sum which has been given under these circumstances are not adequate for the states to manage various types of expenses during this pandemic situation. The government assistance programs are also not sufficient especially for the migrant workers and unemployed. This has brought idea of fiscal federalism under question mark.
Conclusion
Denial of giving remuneration by the Central government will hamper the idea of federalism. So centre should provide ample amount of money to compensate the losses by the states and extend the period of GST compensation for few more years. Also the condition given by the centre to the states to take money from the market should lossen. All this will develop trust between both the government and also welfare work will not get hampered and delayed. As Federalism is the basic structure of the Constitution and it is the responsibility of both the government's to strengthen it.
