Q. Explain the significance of the 101st Constitutional Amendment Act. To what extent does it reflect the accommodative spirit of federalism?

Model Answer: 

101st Constitutional Amendment Act

The 101st Constitutional Amendment Act, passed in 2016, introduced the Goods and Services Tax (GST) regime in India, marking a significant shift in the country’s fiscal federalism.

Key Provisions:
• Creation of the GST Council
• Implementation of a dual GST system (CGST and SGST)
• Provision for compensation to states for revenue losses for five years

Significance of the Amendment:

1. Unified Tax Structure:
• The amendment replaced multiple indirect taxes with a single, unified tax system.
• This simplification has improved ease of doing business and economic integration across states.

2. Economic Growth:
• Elimination of the cascading effect of taxes has reduced the overall tax burden on goods and services.
• A simplified tax structure has the potential to boost economic growth and investments.

3. Cooperative Federalism:
• The GST Council serves as a platform for joint decision-making between the Centre and States.
• This collaborative approach strengthens the federal structure of governance.

Reflection of Accommodative Federalism:

1. Balanced Representation:
• The GST Council’s composition ensures representation from both Centre and States.
• The voting structure (Centre – 1/3rd, States – 2/3rd) gives significant weight to state voices.

2. Protection of State Interests:
• The provision for compensating states for potential revenue losses demonstrates consideration for state finances.
• States retain the power to levy taxes on intra-state supplies, preserving some fiscal autonomy.

3. Consensus-Based Decision Making:
• The GST Council’s decisions are typically made through consensus, promoting cooperative federalism.

Challenges to Accommodative Federalism:

1. Concerns over State Autonomy:
• Some states argue that the GST regime has limited their ability to set tax rates independently.

2. Compensation Issues:
• Delays in compensation payments, especially during economic downturns, have strained Centre-State relations.

3. Revenue Sharing Debates:
• Disagreements over revenue sharing and tax slabs highlight ongoing federal negotiations.

Conclusion:
The 101st Constitutional Amendment Act embodies the accommodative spirit of federalism through collaborative decision-making and balanced representation. While challenges persist, the amendment has significantly reshaped Centre-State fiscal relations. Its success in fostering cooperative federalism will depend on ongoing dialogue and adaptability within India’s federal framework.