India’s federal structure is not a gift of any Government but the brain child of founding fathers of the Constitution who consciously designed it to meet the challenging needs of the multi linguistic and multi cultural background of the States on which our republic is founded.  Apprehending that divergent political groups would come for governance in future, the constitution makers sternly divided legislative and administrative functions between the Centre and the States.

Dr BR Ambedakar on the occasion of adoption of Draft Constitution on November 25, 1949 proclaimed in the Constituent Assembly “The basic principle of federalism is that the legislative and executive authority is partitioned between the Centre and the States not by any law to be made by the Centre but by the Constitution itself.

 This is what Constitution does. The States under our Constitution are in no way dependent upon the Centre for their legislative or executive authority. The Centre and the States are co-equal in this matter.” Similarly, Dr Rajendra Prasad in his concluding remarks on the same occasion explained that “In the present Constitution it has been possible not only to bring in practically all the States which fell within our geographical limits, but to integrate the largest majority of them in India, and the Constitution as it stands practically makes no difference so far as the administration and the distribution of powers among the various organs of the State are concerned between what were the Provinces and what were Indian States before."

Article 276(1) mandates “Notwithstanding anything in Article 246, no law of the Legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.” Article 277 protects taxation rights of the States

Thus, the founding fathers of the Constitution provided constitutional guarantee to States by demarcating legislative and taxing power between the Centre and States which in later years the Supreme Court defined it as basic structure of the Constitution in its historic judgment in the Kesavananda Bharati case. 

Before the GST, the States had full rights to tax as per their desire, which remains curtailed after enforcement of GST.  GST was enforced on the basis of consensus and solemn agreement reached between the States and union, under which the Centre agreed to compensate States towards loss of revenue under GST which it has failed to meet its obligation and is not releasing the compensation due to the States.

Instead the Centre asked the States to borrow to meet its budgetary needs. Non BJP States are opposing the Centre’s advice to borrow while some of the States are advising the Union Government to borrow and pay to the States as the Union Government’s taxing net is wider than the States'. 

This reportedly led to a standstill situation in the last GST Council meeting. Under the Constitution, the Central Government is in well placed situation with various scopes to expand its tax net as it enjoys wide taxation rights which the States cannot have.  The Centre should fulfill its obligations to meet the promise to help the States to overcome financial crisis confronting the State Governments as the States were in the forefront of fighting the Corona virus pandemic by expanding health infrastructure, sorting out problems of migration and other related financial burdens.

The States have reportedly suffered a total loss of about Rs 3 lakh crore. An independent authority like the CAG has also commented on reported misallocation of Rs 3 lakh crore collected under various cess. The Centre is also facing similar financial problem in responding to pandemic control measures.

The ongoing tussle between the States and Union Government shouldn’t be allowed to linger which eventually would weaken the federal foundation as envisaged by the founding fathers of the Constitution. Hence, the Centre and the States must strive to build consensus and avoid any standoff to overcome the present crisis.

The founding fathers of the Constitution had cherished the desire that the States and Centre will function unitedly and set aside differences if any to overcome such challenging times. The trust and confidence of the States should not be allowed to diminish in the interest of federalism and the Centre need to be more sympathetic to rise to the occasion.

(The writer is a former Assembly Deputy Speaker and a former Member, State Planning Board. Phone: 9437412877, E-mail: pandarcp@gmail.com)