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

Significance of the 101st Amendment

• It inserted Article 246A, which gives Parliament and State legislatures concurrent power to tax goods and services (with exclusive Union power over inter-State GST).
• It inserted Article 269A for inter-State GST apportionment and Article 279A for the Goods and Services Tax Council.
• It subsumed a stack of Union and State taxes — including Central Excise on goods, Service Tax, VAT, octroi and entry tax, and several cesses — into CGST, SGST and IGST.
• It enabled the Goods and Services Tax (Compensation to States) Act, 2017, which promised States compensation for five years for revenue shortfall below a 14 per cent annual path, funded by a compensation cess.
• Economically it cut cascading tax-on-tax, unified the domestic market, and created a digital matching system through the Goods and Services Tax Network.

Accommodative federalism in the design

• The GST Council is a constitutional body, not a mere advisory board; States sit with the Union, and the Union’s vote weight is one-third while States together hold two-thirds.
• A decision requires a three-fourths majority of weighted votes of members present and voting, so the Union cannot, on paper, steam-roll a united State bloc.
• Dual GST (Centre and State on the same base) preserved the State as a taxing sovereign, unlike a purely central VAT.
• Compensation for five years was the political bargain that brought reluctant manufacturing and consuming States into the 2016 settlement.
• Petroleum, alcohol for human consumption, and stamp duty on land remaining outside GST show that States kept some independent tax handles.

Limits of that accommodation

• In practice the Union’s one-third vote plus a few aligned States can pass a rate decision; “consensus” has often been political, not a veto for every State.
• In Union of India v. Mohit Minerals (2022) the Supreme Court held that Council recommendations are not binding in the sense of a law; Parliament and State legislatures still enact, which both protects legislative federalism and creates uncertainty.
• Compensation ended in June 2022 as originally timed; extension of cess to repay borrowed compensation, and disputes over IGST settlement, showed that the bargain was time-bound.
• Rate changes, cess on luxury items, and delayed GST Appellate Tribunals have left small dealers and some States unhappy even while the common market holds.

Extent

• The 101st Amendment is accommodative in structure: concurrent tax power, a Council, dual GST, and a compensation deal.
• It is less accommodative in operation when revenue stress meets a strong Union agenda. It is cooperative federalism with an imbalance, not a return to isolated State VATs.