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Editorial: GST Implementation Denotes States-Centre Relationship Paramount for Overall Growth

Port Wings, 16 Jan 2019:

During Lok Sabha elections, the then BJP’s Prime Ministerial candidate and now the Prime Minister of India Narendra Modi had invoked Sardar Patel’s legacy and emphasized that the destiny of the country would have been different had Patel become the first Prime Minister of Union of India.

The wise men who wrote our constitution designed it in such a way that the state and Centre have to be on the same page, especially over matters related to overall development which come under the Concurrent List.

GST is one of the best examples, where there has been a clear emphasis on such relationship. And the new dilemma on allowing CBI to enter states has put the spotlight on states’ powers before the mighty Centre.

It is a federal structure, and nobody can get around it. Thus, showing disrespect to democratically elected people can’t be a way out.

So, the smooth relationship between Centre and states of India is not only an important factor that could help to fix overall development, but also pave way for further bonding.

The Financial relationship between the Centre and the States is provided in the constitution. The constitution gives a detailed scheme of distribution of financial resources between Union and the States. The constitution makes a broad distinction between the power to levy a tax and the power to appropriate the proceeds of a tax. Thus the legislature which levies a tax is not necessarily the authority which retains the proceeds of a tax levied.

The constitution grants the Union Parliament exclusive power to levy taxes on several items. The state legislatures enjoy similar power with regard to several other specified items. In general, the Union Parliament levies taxes on items mentioned in the union list while the state legislatures levy taxes on items mentioned in the state list.

The Finance Commission advises the President, what percentage of the income tax should be retained by the centre, and what principles should be adopted to distribute the divisible pool of the income tax among the states. The commission also advises the President on the question of grants-in-aid to be given to the states.

The scheme of division of financial resources adopted in India is certainly very complicated. It also has the effect of making the states financially dependent on the centre. Such a scheme is certainly corrosive of autonomy of the states. States should be given more financial autonomy than is given now to make their political autonomy real.

Though the recent meeting of States and Centre has agreed in principle to hike the share of revenue for states, there are miles to go, where the actual development could take place.

If the Centre does not wish to understand the importance of state-centre relationship and continues with its big-brother attitude, then Centre would not be in a position to execute any big ticket projects.

The telling example of lack of coordination between states and centre is the announcement of smart cities, which has never moved beyond the announcement stage. Without the state governments’ node, land acquisition for smart cities cannot happen and as such, the project may not take off even after few decades.

So, it is time for the Centre to move towards a better (not bitter) relationship with states.


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