Recent changes in the taxation structure in the Indian economy have emphasized to re-evaluate and study the effects of Fiscal Federalism in India. Fiscal Federalism basically is the line of demarcation between the Centre and the State with respect to public expenditure and taxation system. Boasting a Fiscal Federalism system permits the administration to diminish their expenses on cost-cutting measure as in these approach citizens will receive public service which they prefer, and there will be no unnecessary expenditure. From the financially viability position of inspection also, framing a federalized structure help as it generate an incorporated market.
Being having a Federal System of Government, India exhibits federal character in framing economic and taxation policies. The spirit of federal structure of control is to facilitate the Centre and the State Governments independence such that the autonomy provided with spring of elevating sufficient returns to fulfill the purpose delegated in the direction of it. For the booming function of the federal form of government fiscal liberty and competence form the backbone.
As per Article 246 of Indian Constitution, it is explicitly cited in Part XII that there are a number of taxes which are absolutely under the control of the Union Government, nevertheless it can be segregated amid the Centre and the State through this Article. The diverse course of action for framing the set of laws under the Central Sales Tax can be classified under three heads-
- Rules structured by the State Governments.
- Rules structured by the Central Government.
- Rules which are under the State Sales Tax Act of each State.
Inclusion of Goods and Service Tax (GST) from July, 2017 has changed and transformed the Indian Indirect Taxation System. This may be termed as unified system of taxation in the country where natives has to pay only once for their goods. In this case, CGST and SGST are jointly termed as GST. Therefore while implementing GST also there is a fair rule and policy executed to maintain and continue with the federal nature and form and maintain the trait of our Indian Constitution.
For the successful function of any structure of government, it is extremely essential that the government have the satisfactory fiscal resources. In the course of tax federalism, the State Governments have also been granted with a sufficient amount resources such that they do not over rely on the Union for pecuniary support and resources. For the concern of nationalized economy, some restriction has also been sited on the influence of the State, which grows to be indispensable for a country like India. Hence, it can be assumed that an appropriate steadiness has been sustained between sovereignty and reliance.
