The 101st Constitutional Amendment Act, 2016 represented a historic fiscal reform, introducing the Goods and Services Tax (GST) and reshaping the financial architecture of Indian federalism.
1. Constitutional Basis: Article 279-A
To govern this new unified tax regime, the Amendment inserted Article 279-A, directing the President to constitute the GST Council. The Council is a joint forum of the Centre and the States:
- Chairperson: The Union Finance Minister.
- Members: The Union Minister of State in charge of Finance, and the State Finance/Taxation Ministers.
2. Decision-Making Mechanism (Cooperative Federalism)
The voting structure in the GST Council enforces a high degree of consensus:
Every decision of the Council must be taken by a majority of not less than 3/4ths (75%) of the weighted votes of the members present and voting. The Centre holds 1/3rd (33.33%) of the total weighted votes, while all the States combined hold 2/3rd (66.67%) of the weighted votes.
This means neither the Centre nor the States can unilaterally pass a tax measure. The Centre holds an effective veto, but must secure the support of at least half of the States to pass any recommendation.
3. Dual GST Structure
India implements a Dual GST model consisting of:
- CGST (Central GST): Levied by the Centre on intra-state supplies.
- SGST (State GST): Levied by the States on intra-state supplies.
- IGST (Integrated GST): Levied and collected by the Centre on inter-state supplies, shared between Centre and States based on destination rules.