State GST Compensation: States or Union Obligation

Abstract

In the fiscal year 2020-21, the Central government of India originally refused to pay the states for genuine and false GST revenue losses. While state governments raced to garner support for their legal and financial arguments for their requests, the Centre recited situational necessity and the want of any responsibilities as justifications for its rejection. It provided the states with two compensation alternatives, both of which included borrowing. The Centre, on the other hand, had pledged the opposite, as shown by GST Council sessions and the 101st Statutory Modification Act. The vow includes the responsibility to provide a steady supply of compensation-credit to states, which is especially onerous given the state's tremendous sacrifice. The formation of statutory tax-fields outside of Roster VII of the Constitution of India, in addition to the Centre’s disproportionately dominant role in executing these, was both dependent on the future consideration of the state. The "anti-coercion" doctrine is now recognized in American Statutory law as having its foundation in this. This study shows that this idea has been implicitly enshrined in the Indian Constitution. Hence, GST compensation turns into a statutorily mandated duty, thereby curtailing the Centre's legal latitude. The GST Compensation Act and the GST Statutory Framework will be the main focus of this research.