States cannot be left to the Centre’s mercy

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.