Centre should avoidhegemonic approach to GST

The Supreme Court’s recent ruling that the states and the Centre can equally legislate on matters of goods & services tax (GST) is a welcome development. This upholds the spirit of cooperative federalism, for which the states have been steadfastly fighting. It must be pointed out that the recommendations of the GST Council are products of collaborative discussion and, as the apex court rightly observed, it is not imperative that “one of the federal units must always possess a higher share.” The GST Council’s decisions are recommendatory in nature and to regard them as binding edicts would disrupt fiscal federalism, where both the union and the states are conferred equal power to legislate.
The apex court’s ruling came in a case involving the Centre’s notification imposing integrated goods & services tax (IGST) on importers on ocean freight, which was challenged in the Gujarat High Court successfully. Upholding the HC’s quashing of the Centre’s notification, the SC ruled it unconstitutional and ordered a refund to those Indian importers who had already paid it. Unfortunately, since coming to power, the NDA government has been attempting to dilute the powers of the states, in violation of the spirit of federalism. Prime Minister Narendra Modi as chief minister of Gujarat had always advocated maintaining a federal structure and had strongly opposed any attempt by the Centre at that time to disrupt the federal system. Some of the recent moves by the Centre, including forcing the states to implement power sector reforms by linking it to loans and the move to amend the IAS cadre rules to force the states to relieve IAS officers on the urgent orders of the Centre, are detrimental to the interests of the states. Towards GST too, the Centre should avoid a hegemonic approach. The GST Council prescribes rates and revises them, besides taking a call on what goods and services should be left out of GST.