Context: The ill-effects of Good and Services Tax (GST) and restrictive fiscal federalism in India is a cause of concern for states.
Challenges to the States.
Limited fiscal power: States are now restricted in the Good and Services Tax regime and have forgone many taxes. Limited borrowing capabilities and unclear revenue visibility also hinder fiscal consolidation.
Delayed Payments: Minimum Revenue Tax guaranteed be the centre has increased the problems.
Handling Pandemic: States being at the forefront of pandemic handling through health and police departments are burdened.
Failure of GST
In pre GST era states could have raised their revenue through sales taxes and not be dependent on whimsical magnanimity of Delhi.
False belief of achievement of cooperative federalism, as oppose to that, GST ensured central superiority in fiscal matters. Tax buoyancy and economic efficiency are also not achieved.
Way forward
States have no other option other than liquor to raise revenue currently. Democratically elected state governments should be attributed with more fiscal powers. Only then democratic decentralisation is achieved in a true sense.