It fails every time – yet Indians love to imagine that centralisation is a solution to the country’s problems. It happened with Nehru’s Pla...
It fails every time – yet Indians love to imagine that centralisation is a solution to the country’s problems. It happened with Nehru’s Planning Commission, which went from being a consulting body to one that allowed New Delhi to dictate to the states. And now it is happening to Modi’s Goods and Services Tax. The “One Nation, One Tax” meant to simplify India’s federal taxation structure is now so complicated, some exasperated politicians are talking of returning back to the old system again.
Thursday saw the tax receive a particularly significant blow, as the Union government made it clear that it would be reneging on the promise to pay states the compensation promised to them at the time India changed its taxation systems. Introduced in July 2017, the GST subsumed nearly all indirect taxes collected by states and the Union. To persuade states to move to the new regime, the Centre promised to cover the shortfall in their tax revenues for five years through a new GST compensation cess.
For 2020-’21, the gap between projected tax revenues and GST collections for all states is stunning: Rs 3 lakh crore. In comparison the GST compensation cess, meant to bridge this gap, is projected to...
