A reality check on cooperative
Mains Paper 2: Polity
Prelims level: Cooperative federalism
Mains level: Functions and responsibilities of the Union and the States, issues
and challenges pertaining to the federal structure, devolution of powers and
finances up to local levels and challenges therein
- The Supreme Court commented on the Constitution envisaging a
cooperative federal structure, federalism has come a long way in India.
- In relation to the imposition of President’s rule under Article
356 of the Constitution, federalism is far more mature.
- Between 1947 and 1977, there were 44 instances when the power to
impose President’s rule was exercised.
- Between 1977 and 1996, the power was exercised almost 59 times.
Prime Minister Indira Gandhi’s cabinet resorted to the power an estimated 50
times in her 14 years.
- Taxation powers are another contentious issue and the Central
government has won most of the disputes purely due to express provisions in
- In the Goods and Services Tax (GST) scenario, States have foregone
some taxation powers (octroi, entry tax, luxury and entertainment taxes,
etc.) but have powers to levy taxes through panchayats and municipalities.
- Such powers can result in an anomalous situation of a transaction
being taxed under GST laws and a local law, and this is yet to be tested in
Effects of GST amendments
- After the GST amendments to the Constitution, States have power to
levy tax on sale of petrol, diesel, etc. and these would be revenues of the
- However, the GST Council is yet to recommend inclusion of these
items under GST.
- This brings us to another key dynamic that defines the
Centre-State relationship sharing of taxes.
- The southern States have been vocal about the false positives and
negatives from tax sharing and this mechanism is largely subject to the
recommendations of the Finance Commission(FC) and action by Parliament.
- State levies and State GST form part of a State’s revenue.
- Under Article 269A(1) the GST Council and not the FC has the
powers to make recommendations in relation to sharing of taxes from
- This is important since States have a vote in the GST Council.
- Articles 270(1A) and 270(2) provide that taxes levied under the
GST laws will be shared in the manner ‘prescribed’ in Article 270(2) which
takes us to the FC, and not the GST Council.
- The possible anomaly between roles and powers of the FC and the
GST Council has not been tested but it may make sharing of these revenues
subject matter of the FC and Parliament rather than the GST Council, where
States have more power.
- States don’t merely seek parity with each other, historically
States have also sought parity with the Centre (Sarkaria and Punchhi
- Recommendations of the FC are placed before Parliament and States
have no role in the debate.
- There is no provision for an aggrieved State to challenge the FC
report or seek its enforcement.
- If the Centre refuses to make allocations as per the GST Council,
or if a State is aggrieved by the recommendations itself.
- It is an aggrieved State would have to litigate in the Supreme
Court as it appears that the GST Council is yet to establish a mechanism for
resolving differences in terms of Article 279 (11).
- In 68 years of the Constitution, there is limited precedent for
such extreme actions.
- In an era of coalition politics, this would be a true test of
Q1. Which of the following are the expected benefits of GST?
1. It will create one Indian market.
2. It will expand the tax base.
3. It will foster cooperative federalism.
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only
Q.1 These are powers the Central government enjoys under the Constitution
and States’ legislative powers have routinely yielded to the Centre. Given this
constitutional framework, what is the cooperative federalism that one can hope