The indirect taxes into one common and unified tax.

Topic: EconomicsFinancial Growth
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Last updated: November 3, 2019

The GST tax act is the largestever fiscal legislation that subsumes and unifies all the erstwhile indirecttaxes into one common and unified tax.

It would terminate multiple taxes allaround the country and would create an equal level playing field for all thestakeholders throughout the country. It paves way for the economic integrationand homogenization of India which was missing till now. GST law is the perfect specimenof cooperative federalism where the union and states have abandoned their powerto realise the marvel and vision of one economic India. It’s is a giant leapthat charts a new avenue for fiscal federalism in our country that aims onsynergy, concord and concurrence instead of self-centeredness. This newcommitment to reconcile union and state law into a harmonious legislativeentity would become the hallmark of cooperative federalism.1                                                                                     I.       GST ANDFEDERALISMThe essence offederation2 is the existence of unionand state and the distribution of power3 among the union and states4.

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The Constitution of Indiaprovides for a federation which has strong centralising tendencies.5 The federation of Indiadoes not follow the principle of “traditional federalism”6, which is often attributedwith the Constitution of US7. The Indian federalism hasits own colour and peculiarity, has been designated as a basic feature of theIndian Constitution.8The101st Amendment to the constitution has established the concurrenttaxing in the country for the first time. A new conceptum has been adopted andembraced where the union and states will concomitantly levy tax on both goodsand Services.

9The new taxing regime has given certain privileges and powers to the centre,but in absolute pursuance and consonance of our constitutional scheme.                                     II.       GST: AN ANATOMY OFCOOPERATIVE FEDERALISM.Theword ‘cooperative federalism’ for the first time was defined by A.H Birch inhis book10as “the practise of administrative cooperation between general and regionalgovernment, the practical dependence of the regional governments upon paymentsfrom the general governments”.

The concept of cooperative federalism can betraced back to the period of World War II which led to the formation of K.CWheare’s definition of federalism: ‘the general and regional governments of thecountry shall be independent each of the other within its sphere’11. The federal structure of India is a perfect exampleof cooperative federalism.

12 The goal of IndianConstitution as mentioned in the preamble has never been to maintain theconcrete or traditional federal structure but to constitute Indian into aSovereign, Socialist, Secular, Democratic, Republic.13 The scheme of the Indian Constitutionmakes it clearly visible that, the institutions i.e. Union and State meet andinteract at various levels in a manner which makes them achieve the cherishedconstitutional goal of co-operative federalism.14GST has not usurped the taxing powers of the state so as tojeopardise the states. Owing to our federal structure, GST is dual15, leviedand managed by different administrations.

Centre would levy and collect CentralGoods and Services Tax (CGST)16, andStates would levy and collect the State Goods and Services Tax (SGST) on alltransactions within a State17. Theunion government will have the plenary power to levy and collect GST in thecourse of interstate trade or commerce, or imports known as Integrated GST (IGST)18 but theamount so collected shall be arrogated and appropriated by both central andstate governments. The rates for CGST, SGST and IGST will be administered bythe GST council which is neither an agent of States nor of Centre.19 The GSTcouncil with have representatives from both union as well as the States, alsothe council is not a body of the Union but an independent body in itself.

20 Parliament and legislature of every state, have power to make laws withrespect to goods and services tax imposed by the union or by such state.21 A lawmade by Parliament in relation to GST will not override a state law on GST.22 GSTis a great example of cooperative federalism where the States and Centralgovernment have collectively surrendered their taxing power, in order to adoptthe GST. This is a very good sign that more than half of the states have alsoassented to the amendment, this portrays the development of cooperation betweenstates and centre.                      III.       INDIA AND COOPERATIVE FEDERALISM : THENEED OF HOURThe primary focus of the constitution makerswas never to devise a federal or a non-federal constitution but to have asystem of governance which would cater to the needs of the people and meet thechallenges of the changing world.23 It was opined by C.Rangarajan that Federal structures will undergo a change in order to be able torespond to the forces of globalisation and international competition thatemerges as a consequence.

24 The need for economicgrowth and development has necessitated the parliament of India to bring theimpugned amendment25. GST act is in support ofthe cooperative federal structure and therefore paves the way for holisticgrowth.  GST law has been brought toachieve the values and ideals enshrined in the Preamble, part III26 and part IV27 of Indian Constitution. TheIndian Constitution has been amended, to meet the current economic and fsicalchallenges of the modern world. The federal structure of India will undergo achange due to this amendment but the amendment in no way violates the federalframe work of the Indian Constitution, but rather it strengthens the cooperativefederation of India.1Robert Schutze, From Dual to Cooperative federalism, The Changing Structure ofEuropean law 103 (1st ed., 2009) 2O.

Chinappa Reddy, The Court and theConstitution of India  222 (1sted. 2008).3Herman Fine, The Theory and Practise ofModern Government 166 (4th ed. 1961).4A.V.

Dicey, The Law of the Constitution157 (10th ed. 1959).5Bhim Singh v. U.

O.I & Ors, (2010) 5 SCC 538. 6Dr. Pradeep Jain etc. v. Union Of India And Ors.

, AIR 1984 SC 1420; see also Kuldeep Nayar & Ors. v.Union of India & Ors., (2006) 7 SCC 1.7P.K Tripathi, Federalism: The Reality andthe Myth, J.B.C.

I. 254 (Aug 1974); seealso Jindal Stainless Steel v. State of Haryana, (2017) 12 SCC 1; see also D.P.

Kommers & J.E. Finn, American Constitutional Law 273 (3rd. ed.).8S.R Bomai v.

Union of India, AIR 1994 SC 1918.9INDIA Const. art. 246A.10A.H.

Birch, Federalism, Finance, and Social Legislation in Canada, Australia,and the United States 305 (1st ed. 1955).11K.C Wheare, Federal Government 10(4th ed.

1963).12R.S Sarkaria,  Sarkaria Commission on Centre-State Relations,No.

IV/11017/1/ 83- CSR93 (1983).13P.K Tripathi, Federalism: The Reality andthe Myth, J.B.C.I. 268 (Aug 1974).

14Swaraj Abhiyan v. Union of India, 2007 SCC Online SC 782.15INDIA Const. art. 246A. 16The Central Goods and Services Tax Act, 2017, No.

12, Acts of Parliament, 2017.17INDIA Const. art. 246A, cl. 1.18INDIA Const. art.

269A, cl. 1.19INDIA Const. art. 279A.20Id.21INDIA Const.

art. 246A, cl. 1.22Id.23Dr. Chanchal Kumar, Federalism in India acritical appraisal, 3 JBM & SSR (September 2014).24C. Rangarajan, Fiscal Federalism SomeCurrent Concerns, 2 I.

J.F.S. 13 (2012).25The Central Goods and Services Tax Act, 2017, No.

12, Acts of Parliament, 2017.26INDIA Const. part. III.27INDIA Const. part.

IV.

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