Editorial: Fillip to federal spirit

The Supreme Court’s ruling that the States and the Centre can equally legislate on matters of Goods and Services Tax (GST) is a welcome development. This upholds the spirit of cooperative federalism, for which the States like Telangana have been steadfastly fighting. In fact, Telangana Chief Minister K Chandrashekhar Rao has been at the forefront […]

The Supreme Court’s ruling that the States and the Centre can equally legislate on matters of Goods and Services Tax (GST) is a welcome development. This upholds the spirit of cooperative federalism, for which the States like Telangana have been steadfastly fighting. In fact, Telangana Chief Minister K Chandrashekhar Rao has been at the forefront of the efforts to counter the NDA government’s repeated moves to usurp the powers of the States, be it in agriculture, irrigation or power sectors. Along with a few other States, Telangana had strongly opposed the increase in GST on textiles from 5% to 12%, forcing the Centre to put the decision on hold. 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 and 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.

It is deplorable that the Centre is forcing the States to implement power sector reforms by linking it to loans. Similarly, the move to amend the IAS cadre rules to force the States to relieve IAS officers on the urgent orders of the Centre is detrimental to the interests of the States. It is also mischievous on the part of the Centre to release funds directly to gram panchayats to implement the National Rural Employment Guarantee Act and other Central schemes, bypassing the States. On 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. As per Article 246A of the Constitution, both Parliament and State legislatures have equal power to legislate on matters of taxation. The States are not obliged to toe the Centre’s line because they need to protect the interests and rights of the people. There is a general consensus that GST is a transformational tax reform to remove the inefficiencies of the previous taxation system which had multiple taxes. It is up to the Centre and the States to iron out differences and make it work.

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