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

Model Answer: 

The 101st Constitutional Amendment Act (CAA), 2016, overhauled India’s indirect taxation by introducing the Goods and Services Tax (GST), marking a paradigm shift in fiscal federalism.

Significance of the 101st CAA

• Concurrent Tax Powers: Inserted Article 246A, granting simultaneous power to both Centre and States to levy GST.
• Institutional Innovation: Created the GST Council (Article 279A), India’s first truly federal constitutional body governing tax policy.
• Economic Integration: Realized a unified national market (“One Nation, One Tax”) by eliminating cascading tax barriers.
• Rationalization of Taxes: Subsumed over 17 distinct central and state indirect levies (e.g., VAT, Excise Duty, Octroi).

Accommodative Spirit of Federalism: Achievements and Limitations

Manifestation of Accommodative Federalism

• Pooled Sovereignty: Centre and States voluntarily ceded their exclusive taxation domains to joint decision-making.
• Democratic Voting Power: GST Council decisions require a 3/4th majority, ensuring equitable voice (States: 2/3rd weight; Centre: 1/3rd).
• Culture of Consensus: Historically, almost all GST Council decisions have been unanimous, reflecting deep institutional cooperation.
• Revenue Protection: Enacted the GST (Compensation to States) Act to guarantee 14% annual revenue growth for five years.

Emerging Frictions (Limitations to Accommodation)

• Erosion of Fiscal Autonomy: States lost their primary lever to unilaterally adjust taxes during localized economic crises.
• Trust Deficits: Severe frictions emerged over delayed GST compensation cess payouts during revenue crunches (e.g., COVID-19 pandemic).
• Central Veto Dynamics: Despite higher state weightage, no decision can pass without the Centre’s 1/3rd vote.
• Fragile Mandate: The Supreme Court ruled GST Council recommendations have only “persuasive value”, not mandatory force (Union of India v. Mohit Minerals, 2022).

The 101st CAA remains a monumental experiment in cooperative federalism. Sustaining this fiscal union requires addressing trust deficits through equitable revenue-sharing and continuous institutional dialogue.