1. Introduction
  2. Define cooperative federalism & its key parameters.
  3. Now, explain how GST fails each of these parameters.
  4. Conclusion

So extensive have been the debates and deliberations on the Goods and Services Tax that yet another debate should perhaps begin. This is about the idea that GST is an assault against the core of ‘cooperative federalism’, a prominent but under-theorized concept.

Cooperative federalism is a “cherished constitutional goal.” Cooperative Federalism is a federal structure which solidifies unitary ideas whilst also countenancing the states to operate independently within some limited contours. It thus, involves the sharing of authority between federal and state agencies, often leaving state agencies with discretion to implement broad federal policy goals.

The true spirit of cooperative federalism can be gauged from parameters – (i) Autonomy (ii) Subsidiarity and (iii) Solidarity – subsequently examined in the context of GST.

  • The autonomy of a political unit is determined by the extent of control over its laws. It exists when one government is free from the controls of a higher tier of government. Thus, in a model of cooperative federalism, the states must be fairly autonomous in their spherese. the states must be empowered to legislate on the subjects assigned to them. This is the ‘positive function’ of autonomy. Autonomy also performs a negative function – it excludes the centre from intruding into the states’ sphere of legislative competence and vice versa.
  • The Constitution of India, before the 101st Amendment was passed, provided for a complete dichotomy in taxation-powers of the centre and states, thereby performing both the positive and negative function of autonomy. Tax-based entries found a place only in List I (Union List) and List II (State List) of the Seventh Schedule. Therefore, traditionally, taxes levied by a state cannot be levied by the centre and vice versa.
  • However, with the insertion of Article 246-A, the centre and states are concurrently authorised to levy GST. States have now lost the freedom to choose their tax-rates. A choice to change the tax-rate would mean approaching the GST Council, thereby surrendering to the sanction of a special majority of weighted votes. Consequently, the states’ freedom of economic and developmental pursuits has also been curtailed to a great extent.
  • The second parameter – subsidiarity – has to be understood in terms of ‘proximity’ and ‘effectiveness’. Proximity implies that local matters must be dealt with locally. Effectiveness means the ability of a government to do what it is meant to.
  • The principle of subsidiarity denotes that a state must deal with its matters, but, if not effectively done, the centre must intervene. Thus, subsidiarity endorses pluralism and provides the states’ the means to meet their ends whilst also offering the centre’s assistance as a last resort. The Indian constitution is replete with provisions intended to make this principle manifest.
  • However, the implementation of GST has distorted this principle. While “efficient taxation” is a stated reason for the introduction of GST, no statement has been made on what was inefficient in the earlier scheme of state taxation.
  • This, coupled with the fact that GST is believed to be fundamentally flawed in several aspects, indicates utter disregard to the ‘proximity’ element in the principle of subsidiarity. It appears that the centre is intervening in areas quite uncalled for.
  • With regards to solidarity, one must mean political solidarity, which comes from a sense of belonging to a common body politic. It is a political value which refers “to the concept of membership in a moral community or the collective that hold autonomous moral agents together.”
  • Therefore, the principle of solidarity, in the context of cooperative federalism, would effectively involve self-governing states playing the role of ‘autonomous moral agents’ and identifying themselves as members of the common political project.
  • Subsuming as many as thirty-four state taxes, GST prescribes the same tax-rate for the centre and all the states, payable through the same procedures. It thus appropriates the taxation capacity of the states, thereby making them passive actors of the play. By compelling states to yield their powers of taxation in favour of the centre, GST not only violates the doctrine of full faith and credit, but also, belittles the states’ roles in the common body politic. The goal of “one nation, one tax” thus undermines the solidarity principle.
  • GST, which has been hailed as “a classic example of cooperative federalism”, does not, paradoxically, stand positive on any of the parameters used for qualifying a federal model as one of cooperative federalism.
Legacy Editor Changed status to publish September 3, 2022