‘One nation, one tax’ wasn’t an ‘act of God’
The compensation provisions of the GST regime were a precondition to the implementation of the regime without which the goal of unifying India into a single market would not have fructified. Therefore, no limits on the compensation can be justified, even after five years.
The marriage between the Centre and states in India has never been a very happy one. Nonetheless, the couple never went for a divorce, and to the rest of the world it appeared a happy one. This has been made possible by mechanisms like the finance commission coupled with a compromising approach of states, which in turn was rewarded by various constitutional commitments by the Centre. The most recent compromise has been the implementation of the goods and services tax (GST). It was possible only after a decade-long negotiation wherein both surrendered many of the privileges of indirect taxation that they enjoyed. States, which together account for around 60% of the combined expenditure of the Centre and states, have been enticed to compromise with a constitutional guarantee of 14% growth in their tax revenue under the GST regime. Hence, had there been no GST Compensation Act, GST would not have been there for establishing the long cherished ‘One Nation, One Tax’ regime. The whole process has been touted as the success of cooperative federalism in the largest democracy of the world.