[Critically evaluate the state-wise disparities in GST revenue growth and their implications for cooperative fiscal federalism.](/upsc-mains-answer/critically-evaluate-state-wise-disparities-gst-b7a9d70)

GST, introduced through the Constitution (101st Amendment) Act, 2016, was designed as a destination-based tax pooling sovereignty in the GST Council under Article 279A [1]. Yet nine years on, headline national buoyancy conceals sharply uneven state-level growth — in recent months fewer than half of the States/UTs recorded post-settlement growth above the national average, making disparity, not the aggregate, the real federal question.

Why disparities persist

• Destination principle favours consuming states: revenue accrues where consumption occurs, so high-consumption, urbanised states gain while manufacturing-origin states lose the earlier origin-based advantage.
• Import-linked IGST concentration: buoyancy driven by import IGST and by services such as real estate and business services accrues to port and metropolitan states rather than being broad-based.
• Structural base effects: low per-capita-income states begin from a thin formal tax base, so equal percentage growth yields unequal absolute revenue.
• Inflation, not output: being ad valorem, GST rises with price levels; states with inflation-driven collections show growth without matching real economic activity.

Positive federal dimensions

• The GST Council remains a functioning cooperative forum where the Centre and States jointly decide rates and exemptions [1].
• The GST (Compensation to States) Act, 2017 protected states at 14% growth over the 2015-16 base for five years, cushioning the transition [2][3].
• Finance Commission transfers offset horizontal imbalance; the Sixteenth Finance Commission retained 41% devolution and added a state's GDP contribution to its criteria for 2026-31 [4].

Adverse implications

• Loss of independent rate-setting narrows fiscal autonomy just as revenue diverges, breeding demands for a longer compensation window.
• Compensation's lapse shifted risk to weaker states, straining trust within the Council.
• Persistent divergence risks converting a cooperative institution into a bargaining arena.

On balance, GST has succeeded as a unified market but under-delivered on revenue equity across states. The remedy lies not in retreating from pooled sovereignty but in strengthening it — transparent state-wise data publication on the GST portal [5], a rules-based dispute mechanism, and Finance Commission grants calibrated to GST underperformance. Cooperative federalism, as envisioned in Article 279A, deepens when disparity is measured and corrected, not denied.