Explain the significance of the 101st Constitutional Amendment Act. To what extent does it reflect the accommodative spirit of federalism?

Model Answer


101st Constitution Amendment Act, 2016 enabled the introduction of GST Tax in India which is destination-based, indirect tax overhauling the erstwhile complex, cascading system of multiple indirect taxes levied separately by central and state governments.


Significance of 101st Constitution Amendment

  • Simplified tax structure: GST has simplified India’s complex tax structure by replacing multiple indirect taxes with a single, unified tax enhancing ease of doing business. 
  • Foundation of unified national market: GST created a unified national market by eliminating cascading taxes and other trade barriers between states boosting inter-state trade and commerce.
  • Increased tax revenue: GST has boosted domestic tax revenue for both central and state governments. Higher tax buoyancy from GST will help fund domestic social and infrastructure projects.
  • Progressive tax: Since GST will destination-based tax it is expected to boost revenues for consumerist states which do not have a manufacturing base. Ex. UP, Bihar etc.
  • Revenue guarantee: Centre introduced a GST Compensation mechanism guaranteeing 14% revenue buoyancy to states from their base year.
  • GST Council: It is a constitutional body which has representation of both Centre and States economic ministries, which can serve as a model

GST and accommodative spirit of federalism

Consensus building: 

  • GST was introduced after thorough consultation and bargaining between Centre and States wherein Centre and States both let go of their exclusive powers of taxation and agreed for a unified tax structure covering both goods and services.
  • Centre guaranteed states clear revenue visibility to address their concerns during the initial years of GST. 14% revenue jump.

Revenue and adjudication sharing: GST revenue and adjudication is shared in a pre-defined formula between centre and states. This allows mutual trust and predictable relations between centre and states.

GST Council: It is a constitutional body with joint representation from Centre and States revenue ministers which takes all important decisions for GST giving both centre and states a say in implementation of GST. All decisions of GST council have taken place by consensus despite mechanism of voting reflecting the trust of centre and states in addressing differences. Despite SC observing that decisions of GST Council are not binding on Parliament and State legislatures, all decisions of GST council have been implemented by Central and state governments.

However, some concerns against federal spirit with GST regime are:

  • Central government has disproportionate voting share effectively enjoying veto on all decisions.
  • Central government’s move back on compensation mechanism is hurting states.
  • Central government usually sets the agenda for GST Council.


However, despite some concerns GST marks a new dawn in economic federalism of the country and serves as a model which can be emulated in other areas of health and education strengthening the overall federal architecture of Indian Constitution.

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