{"id":192734,"date":"2022-06-27T20:17:18","date_gmt":"2022-06-27T14:47:18","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=192734"},"modified":"2022-06-28T10:19:02","modified_gmt":"2022-06-28T04:49:02","slug":"on-gst-the-problem-is-trust-deficit","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/on-gst-the-problem-is-trust-deficit\/","title":{"rendered":"On GST, the problem is trust deficit"},"content":{"rendered":"\n

News<\/strong>: On 1st July 2022, India\u2019s goods and services tax (GST) will be five years old. Further, the GST Council will be meeting over the next few days.<\/p>\n

What are the issues with GST?<\/strong><\/p>\n

(1) The breakdown of trust and cooperative federalism between states and the Union government,<\/p>\n

(2) The expiry of the revenue guarantee<\/strong> that protected states\u2019 revenues. The state governments were given five-year insurance <\/strong>from the Centre of a minimum revenue guarantee<\/strong>. However, the GST failed to live up to its economic promises to<\/strong> states.<\/p>\n

In the past, the Union government levied and appropriated cess revenues for itself without sharing them with the states.<\/p>\n

The center is reluctant to provide compensation because of its deteriorating fiscal situation,<\/strong> foisted by high global crude oil prices, rising fertilizer imports, and expanding welfare expenditure.<\/p>\n

(3) Recently, the Supreme Court awarded its judgment highlighting that the GST Council\u2019s recommendations are not binding on the states. The states can comply fully with the Council\u2019s recommendations or modify them as they deem necessary.<\/p>\n

(4) Democratically elected state governments in India do not have sole powers <\/strong>for both direct and indirect taxation. This is in very contrast to the rest of the federal democracy.<\/strong> GST centralized India\u2019s indirect taxation.<\/p>\n

(5) The GST regime has witnessed flawed implementation. There has been GST\u2019s economic failure<\/p>\n

(6) <\/strong>The SC\u2019s judgment has opened the window for states to override the fundamental GST <\/strong>premise of a \u201cone nation one tax\u201d. If pushed to a corner, states may now use the SC ruling as a shield.<\/p>\n

The Way Forward<\/strong><\/p>\n

The cooperation between states and the Union cannot just be an economic compact<\/strong>. It should be a broader political ethic<\/strong>.<\/p>\n

Recently, the SC observed that it is in the national interest to have both cooperative and competitive federalism.<\/p>\n

In the larger and longer-term interest<\/strong> of GST, it is prudent to extend the compensation guarantee<\/strong>. All the state governments want an extension of the compensation guarantee. The focus should be on the GST revenues buoyancy rather than on eroding the states\u2019 confidence.<\/strong><\/p>\n

To address trust deficit and revenues issues, there is a need for rationalization of rates <\/strong>and ease of GST compliance. The Union government should commit to the states that it will not resort to cesses and surcharges that are outside the shareable pool of revenues. <\/strong><\/p>\n

The union government must resolve to honor the revenue guarantee commitment<\/strong> to the states. It must respect and uphold the true spirit of fiscal federalism, <\/strong>as well as political and constitutional federalism<\/strong>.<\/p>\n

Now, the government should move towards decentralization by giving states powers for direct taxation.<\/p>\n

Source<\/strong>: The post is based on the article \u201cOne GST, the problem is trust deficit\u201d<\/strong> published in the Indian Express<\/strong> on 27th<\/sup> June 2022.<\/p>\n","protected":false},"excerpt":{"rendered":"

News: On 1st July 2022, India\u2019s goods and services tax (GST) will be five years old. Further, the GST Council will be meeting over the next few days. What are the issues with GST? (1) The breakdown of trust and cooperative federalism between states and the Union government, (2) The expiry of the revenue guarantee… Continue reading On GST, the problem is trust deficit<\/span><\/a><\/p>\n","protected":false},"author":10308,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[212,10500],"class_list":["post-192734","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-2","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":1700796247,"cached_date":1704879757},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/192734","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10308"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=192734"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/192734\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=192734"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=192734"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=192734"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}