RECALIBRATING COOPERATIVE FEDERALISM: FISCAL IMPLICATIONS OF GST IN INDIA

The introduction of the Goods and Services Tax (GST) in 2017 to establish a uniform indirect taxation system in India is a major reform towards removing the cascading effects of the multiple taxation system. Conceived with the framework of cooperative federalism, GST sought to coordinate the centre- state fiscal relations. However, its practical implications reflect a compromise with the state’s autonomy and the dilution of the federal structure of the nation. The article examines the pre- GST regime and the rationale behind the reform, while critically analysing the impact of the new regime on fiscal centralisation at different levels. The study argues that the GST Council's weighted decision-making mechanism enforces fiscal centralisation, thereby increasing revenue uncertainty among the states. It contends that the dependence of the local governments on higher tiers of government is due to the lesser decentralisation of power. Further, the paper analyses the taxation model of Canada to assess alternative approaches for federal tax harmonisation. Hence, achieving a sustainable federal balance requires an institutional recalibration, assuring meaningful participation of states in the GST framework.