Five years of GST: Taxing time for relations between Centre and states

Shrinking fiscal space has brought states on a collision course with the Centre

In August 2020, as the coronavirus pandemic ravaged states’ finances and their revenues dried up amid a huge shortfall in Goods and Services Tax (GST) compensation cess, at least 10 states – all ruled by parties other than the Bharatiya Janata Party (BJP) – rejected the Centre’s proposal that states borrow to meet the shortfall. This worsened the Centre-state tussle at the GST Council, with some states threatening to take the Centre to the Supreme Court if it reneged on its commitment of fully compensating for states’ GST revenue shortfall.

Since the rollout of GST five years ago as a