Fiscal federalism represents a critical juncture of constitutional and economic governance, as it shapes the raising, allocation, and expenditure of financial resources across government tiers. The constitutional regime of taxing powers in India has undergone a significant shift in the post-independence period, as reflected in the landmark Goods and Services Tax (GST) and the addition of Article 246A of the Indian Constitution in 2017. This article, through a qualitative research methodology that incorporates a critical understanding of legal doctrine, institutional analysis, and a comparative study of mature (Germany, Canada, United States) and developing (Brazil, South Africa) federations, critically evaluates the complex balance of economic efficiency and federal autonomy. Although it is conceded that the GST regime has resulted in substantial economic efficiencies, as it has eliminated cascading effects, reduced compliance costs, and created a single market for the sale of goods and services, it is submitted that there are also a host of challenges with respect to state fiscal autonomy, the working of the GST Council, and the balance of harmonisation with flexibility. Therefore, it is submitted that the way forward is neither centralisation nor decentralisation, but institutional innovation that balances economic efficiency with the challenges of state fiscal autonomy. Ultimately, this research aims to provide policy recommendations for recalibrating cooperative bodies, strengthening equalisation, widening the fiscal space for states within a harmonisation framework, and developing effective dispute resolution mechanisms that do not undermine the basic principles of a vibrant federation.
Palak Jagtiani (Thu,) studied this question.