Q. Explain the significance of the 101st Constitutional Amendment Act. To what extent does it reflect the accommodative spirit of federalism? (250 words, 15 marks)
Why the Question?
UPSC PYQ – CSE Mains – 2023
Keywords of the Question
- 101st Constitutional Amendment Act
- Accommodative spirit of Federalism
Directive Word
Explain – Clarify a topic by giving a detailed account as to how and why it occurs, or what is meant by the use of this term in a particular context. Your writing should have clarity so that complex procedures or sequences of events can be understood; defining key terms where appropriate, and be substantiated with relevant research.
To what extent – It prompts to evaluate the degree to which a statement or proposition is true. Consider how far the statement holds true. Support your evaluation with relevant examples and evidence. Discuss both supporting and opposing viewpoints to present a balanced analysis.
How to approach this Question?
Introduction
- Briefly introduce the 101st Constitutional Amendment Act.
- Mention its primary objective: the introduction of the Goods and Services Tax (GST).
Body
- Significance of the 101st Constitutional Amendment Act:
- Unified tax regime.
- Simplified tax compliance.
- Boost to the economy.
- Enhanced supply chain efficiencies.
- Promotion of digital governance.
- Reflection of the Accommodative Spirit of Federalism:
- Establishment of the GST Council.
- Cooperative federalism through joint decision-making.
- Revenue-sharing mechanisms.
- Addressing fiscal needs of states.
- Challenges and Issues:
- Initial implementation challenges.
- Concerns of smaller states.
- Ongoing adjustments and reforms.
Conclusion
- Summarize the significance and federal aspects.
- Highlight the ongoing evolution and potential improvements.
- Conclude with the overall impact on Indian federalism and governance.
Note: Please note that the following ‘answers’ are not ‘model answers’ nor are they synopses in the strictest sense. Instead, they are content designed to meet the demands of the question while providing comprehensive coverage of the topic.
Answer Key
Introduction
The 101st Constitutional Amendment Act, 2016, introduced the Goods and Services Tax (GST) in India, replacing a multitude of central and state taxes with a unified tax regime. This landmark reform aimed to simplify the indirect tax structure and create a single national market.
Body
Significance of the 101st Constitutional Amendment Act
- Unified Tax Regime: GST subsumed various indirect taxes, eliminating the cascading effect of taxes and creating a seamless national market.
- Simplified Tax Compliance: The standardized tax system reduced the complexity of tax compliance, particularly benefiting businesses operating across multiple states.
- Economic Boost: By streamlining the tax process, GST has enhanced the ease of doing business, contributing to economic growth. For instance, the World Bank noted an improved business environment in India post-GST implementation.
- Enhanced Supply Chain Efficiencies: The removal of state border check-posts has reduced transportation time and costs, benefiting sectors like logistics and e-commerce.
- Promotion of Digital Governance: The GST Network (GSTN) digitized tax administration, promoting transparency and reducing human discretion.
Reflection of the Accommodative Spirit of Federalism
- GST Council: The establishment of the GST Council, comprising representatives from both the central and state governments, exemplifies cooperative federalism. The Council’s decisions are made through consensus, ensuring that both levels of government have a say in the tax regime.
- Revenue Sharing: The GST revenue is shared between the Centre and the states, addressing the fiscal needs of states. This mechanism ensures that states are compensated for any revenue loss due to GST implementation.
- Joint Decision-Making: The GST Council’s role in setting tax rates, exemptions, and thresholds reflects a collaborative approach, balancing the interests of both the Centre and the states.
- Addressing State Concerns: The Council periodically reviews and adjusts GST rates and policies to address the concerns of different states, demonstrating flexibility and accommodation.
Challenges and Issues
- Implementation Challenges: Initial teething problems, such as technical glitches in the GSTN and compliance issues, posed challenges.
- Concerns of Smaller States: Smaller states have expressed concerns about revenue loss and the adequacy of compensation.
- Ongoing Adjustments: Continuous adjustments and reforms are necessary to address emerging issues and improve the GST framework.
Conclusion
The 101st Constitutional Amendment Act is a significant reform that has streamlined India’s indirect tax system and fostered economic growth. It reflects the accommodative spirit of federalism through the establishment of the GST Council and the collaborative decision-making process. While challenges remain, the ongoing evolution of the GST regime highlights the dynamic nature of Indian federalism and governance.