: Opinion: Extend GST compensation period #IndiaNEWS #News By Dr Ranjith Reddy The process of formulating one-nation-one-tax started long ago but reached its logical conclusion by bringing the entire

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Opinion: Extend GST compensation period #IndiaNEWS #News
By Dr Ranjith Reddy
The process of formulating one-nation-one-tax started long ago but reached its logical conclusion by bringing the entire country under a unified indirect taxation system and, at the stroke of midnight of June 30/July 1st, GST, the biggest and landmark indirect tax reform in Independent India, became a reality.
Prime Minister Narendra Modi had rightly said: “It is a win for the democratic ethos of India and victory for everyone. �
It is true as it demonstrated how federal constituents of the Indian union pooled their sovereignty for this new tax regime.
Former Finance Minister Arun Jaitley said: “GST Council is India’s first federal institution where the sovereignty of the Centre and States pooled together in a federal institution. � And, added, “it is a federal contract. � He also said, while moving the GST legislation: “It is not the end, but start of the journey. “
Mandate by States
It is not a ‘contract’; rather, it is the mandate given by the States to the union government under Section 18 of the Constitution (One Hundred and First) Act, 2016. And, it is also incumbent upon the union government to make good for States if there is any loss of revenue due to the implementation of the GST regime.
Though it is in black and white that compensation would be paid for five years ie, till June 2022, the journey of 5 years in the world’s largest tax reform is too short. So, the underlying philosophy is that the government of India would continue to compensate States if their revenue falls short of the threshold limit.
Recently, the Supreme Court ruled that the recommendations of the GST Council are only persuasive and not binding on States or Union. This has created ripples and Finance Ministers of some States have also made some remarks, including revisiting the GST mechanism as a whole. But, the fact is that the GST Council consists of representatives from all States and the Union. Decisions taken by the Council, which has met 46 times so far, are unanimous – hope it continues to do so – indicating a high level of fiscal maturity and understanding between federal constituents and the Union.
The Supreme Court also said that federalism in India is a dialogue in which the States and Centre constantly engage in conversations and, although the Constitution confers the union with a higher share of power in certain situations to provide security and stability in the country, the States still can resist this mandate by using different forms of political contestations.
The crux is that the States have a higher vote share of two-thirds in the GST Council (Article 279A) to resist and reverse if any proposal is pushed by the Union.

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