Evaluate the GST Council as an instrument of cooperative fiscal federalism in light of recent revenue trends.

The GST Council under Article 279A brings the taxing powers of the Union and the States together in one body. The Centre holds one-third of the votes and the States two-thirds, and every decision needs a three-fourths majority [1]. The September 2026 data, with gross GST up 14.7% to ₹2.03 lakh crore [4], tests how well this shared design is working.

Strengths: cooperative federalism at work

• Reform by consensus: the 56th meeting replaced four slabs with 5% and 18%, plus a 40% special rate. The new rates took effect on 22 September 2025 [2].
• Revenue held up despite rate cuts: collections grew even though last year's rates were higher. Analysts give credit to simpler compliance and more GST audits [3]. Gross collections for H1 FY27 grew 11.6% [4], up from FY26's five-year-low like-for-like growth of 5.57% [5].
• Shared burden: the Centre borrowed during the pandemic to compensate States, and that borrowing was repaid by extending the compensation cess [7].
• Supreme Court support: in Mohit Minerals (2022), the Court held that the Council's recommendations are persuasive, not binding. It described the Council as a forum for dialogue between the Centre and the States [8].

Weaknesses: strains in the fiscal bargain

• States have lost their safety net: the compensation cess ended in March 2026, just as rates fell. Kerala estimated losses of ₹8,000–10,000 crore a year, and opposition-ruled States asked for five more years of compensation [6].
• The Centre has an effective veto: with one-third of the votes and a three-fourths threshold, no decision can pass without the Centre [1].
• Growth is led by imports: import GST rose about 26%, against 10.1% for domestic GST [4]. This took imports to their highest-ever share of collections [3]. A strong national total can hide weak growth in individual States.
• No agreed replacement for the cess: a Group of Ministers was set up to decide what replaces the cess and how the Centre and the States share it [9].

The Council has used consensus to simplify GST rates while keeping revenue resilient, but its legitimacy now depends on fair revenue-sharing. Three steps would make it a fuller instrument of cooperative fiscal federalism: a rule-based split of any levy that replaces the cess, State-wise GST data for the 16th Finance Commission, and regular use of the Council's dispute-resolution mechanism. That would keep it true to its constitutional mandate of a harmonised national market [1].