2023 GS2 Answer

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

Question from UPSC Mains 2023 GS2 Paper

Model Answer: 

101st Constitutional Amendment Act

101st Constitutional Amendment Act, passed by the Indian Parliament in 2016, is a landmark legislation that introduced the Goods and Services Tax (GST) in India. GST is a comprehensive indirect tax levied on the manufacture, sale and consumption of goods and services at the national level. This amendment replaced a multitude of indirect taxes with a unified tax regime, aiming to create a single market, enhance the ease of doing business, and significantly boost the economy. It reflects the accommodative spirit of federalism by ensuring a cooperative relationship between the Centre and the States.

1. One Nation, One Tax:

The 101st Constitutional Amendment Act brought about the concept of ‘One Nation, One Tax’, thereby integrating the Indian market. Before the amendment, there were several indirect taxes levied by the Centre and the States separately, leading to a complex tax structure. The amendment simplified this by introducing a single tax regime, thereby reducing the cascading effect of tax, enhancing competitiveness and improving ease of doing business.

2. Revenue Sharing between Centre and States:

The amendment provides for a mechanism of GST Council to make recommendations to the Union and the States on issues related to GST. The GST Council is a federal body where both the Centre and the States get representation. It decides the revenue sharing between the Centre and the States. This ensures a cooperative federalism where the Centre and the States jointly decide on the matters related to indirect taxation.

3. Dispute Resolution Mechanism:

The amendment also provides for a mechanism to resolve disputes arising out of its recommendations. Any dispute between the Centre and the States, or among the States themselves, can be referred to the GST Council. This reflects the accommodative spirit of federalism by providing a platform for the Centre and the States to resolve their differences amicably.

4. Compensation to States:

The amendment provides for compensation to the States for any loss of revenue for a period which may extend to five years. This provision ensures that the States are not at a disadvantageous position due to the implementation of GST, thereby reflecting the accommodative spirit of federalism.

5. Enhancing Fiscal Autonomy of States:

The amendment enhances the fiscal autonomy of the States by allowing them to levy and collect the GST. This empowers the States to mobilize their own resources and reduces their dependence on the Centre for financial resources.

6. Promoting Cooperative Federalism:

The 101st Constitutional Amendment Act promotes cooperative federalism by fostering a harmonious relationship between the Centre and the States. It ensures that both the Centre and the States work together in the spirit of partnership and cooperation for the common goal of economic growth and development.

7. Facilitating Economic Integration:

The amendment facilitates economic integration by creating a single market across the country. It removes the barriers to trade and commerce between the States, thereby promoting inter-state trade and commerce.

Conclusion

The 101st Constitutional Amendment Act is a significant legislation that has transformed the indirect tax regime in India. It reflects the accommodative spirit of federalism by ensuring a cooperative relationship between the Centre and the States. It promotes the principles of cooperative federalism, enhances the fiscal autonomy of the States, and facilitates economic integration. It is a testament to the spirit of federalism in India, where the Centre and the States work together in the spirit of partnership and cooperation for the common goal of economic growth and development.

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