The GST Council is a unique institution in India's cooperative federalism. Discuss its constitutional basis, decision-making mechanism, and the tensions revealed during the COVID-19 compensation cess controversy.

Q. The GST Council is a unique institution in India's cooperative federalism. Discuss its constitutional basis, decision-making mechanism, and the tensions revealed during the COVID-19 compensation cess controversy. (15 marks, 250-350 words)

Created by the Constitution (101st Amendment) Act, 2016, the GST Council is India's first permanent constitutional forum where the Union and all States jointly decide a shared tax base — making it the institutional test-bed of cooperative federalism.

Constitutional basis - Article 279A establishes the Council; Article 246A grants Parliament and State legislatures concurrent power to levy GST, and Article 269A vests IGST on inter-State supply with the Union for apportionment. - Composition: Union Finance Minister as Chairperson, Union MoS (Finance), and Finance Ministers of all States/UTs with legislatures. - It underpins the "One Nation, One Tax" design — a destination-based dual levy (CGST+SGST, IGST) that replaced 17+ fragmented taxes [1].

Decision-making mechanism - Decisions need a three-fourths weighted majority: the Centre holds one-third of votes, States collectively two-thirds — neither side can act alone, forcing negotiated consensus. - Convention has favoured consensus over voting; the 56th Council (Sept 2025) thus compressed four slabs into 5% and 18% plus a 40% sin rate, effective 22 September 2025 [2]. - In Union of India v. Mohit Minerals (2022), the Supreme Court held Council recommendations are persuasive, not binding, affirming "collaborative dialogue" rather than Union primacy [3].

Tensions in the compensation cess controversy - States were guaranteed 14% annual revenue growth for five years; the COVID-19 contraction collapsed cess collections, and the Centre initially distinguished shortfall due to "an act of God" from GST implementation. - Resolution came outside the consensus norm — a special borrowing window (Oct 2020) for a ₹1.10 lakh crore shortfall, passed to States as back-to-back loans, plus extra borrowing of 0.5% of GSDP [4]. - This exposed asymmetry: States had surrendered fiscal autonomy but depended on Union borrowing, and opposition-ruled States alleged coercive bargaining.

The Council remains a functioning experiment in shared sovereignty, and its post-2025 rationalisation shows consensus can still deliver structural reform. Institutionalising a dispute-settlement mechanism under Article 279A(11) and predictable revenue-protection norms would convert episodic bargaining into durable trust — realising the constitutional promise of federalism as partnership.

(~330 words)

Sources: 1. Nine Years of GST: Simplifying Taxation, Strengthening India — PIB Backgrounder, 30 June 2026 — GST design, dual structure, destination-based levy, replacement of fragmented taxes 2. Recommendations of the 56th Meeting of the GST Council, PIB — two-slab rationalisation (5%/18% + 40%), effective 22 September 2025 3. Union of India v. M/s Mohit Minerals Pvt. Ltd., Supreme Court of India, 19 May 2022 — GST Council recommendations recommendatory, not binding 4. Special Window to States for meeting the GST Compensation Cess shortfall, PIB — ₹1.10 lakh crore shortfall, back-to-back loans, 0.5% GSDP additional borrowing