VRANDA RELLAN & AADISHA SHETTY
STUDENTS OF SYMBIOSIS LAW SCHOOL HYDERABAD
ABSTRACT
Many nations have embraced the adoption of the Goods and Services Tax (GST) as a landmark development in indirect taxation that will simplify the convoluted tax system and improve revenue collection. However, discussions and worries about its implementation have surfaced, notably in relation to fiscal federalism. The division of taxing and spending responsibilities between the federal government and local/state governments is known as fiscal federalism[1]. The problems of fiscal federalism provided by the GST framework are discussed in this abstract. It starts by looking at the development of indirect taxation structures in federal countries and the historical background of fiscal federalism. In order to emphasise their significance in preserving an effective and constructive fiscal relationship between various levels of government, the study digs into the fundamental concepts of federalism in finance, such as both horizontal and vertical fiscal imbalances and transfer payments among governments. The thesis also talks about how states are having a hard time transitioning to the new GST regime, especially in terms of their fiscal independence and income collection.
It investigates how the GST may affect state budgets, service provisions, and policymaking. As a possible response to the problems the GST presents for fiscal federalism, the article offers several alternative remedies towards its conclusion. In order to achieve both effectiveness and equity in the allocation of resources, it promotes more cooperation and communication between federal and state governments. The study makes reform recommendations for enhancing state fiscal sovereignty while preserving the advantages of a harmonised tax system[2].
[1] M. Kour, k. Chaudhary, S. Singh, & B. Kaur, A study on impact of GST after its implementation, (2016). International Journal of Innovative studies in sociology and humanities, 1(2), 17-24
[2] Nayyar., Singh, A Comprehensive Analysis of Goods and Services Tax (GST) in India, 2018, Indian Journal of Finance, 12(2)