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The ultimate means of reaching Good Governance is participative democracy, and the first stepping stone in this direction is reinstitutionlisation of PRIs as an effective means of participation in the governance hierarchy. Cooperative federalism, also known as marble-cake federalism, is a concept of federalism in which national, state, and local governments interact cooperatively and collectively to solve common problems.One should not forget that in India, the government exists at three tiers: centre, state, and local, that is, at the panchayat and municipality level as well. This spirit of cooperative federalism is not reflected in the GST, as panchayats, which number at 2,56,252 and which consist of more than 3 million elected representatives, are excluded from a share in the same.
Cooperative federalism must travel down to the third tier of government because of the effects that the implementation of GST is likely to have on panchayats:
(i) Drying up of finances, in the absence of a provision for revenue sharing between the states and panchayats in GST,
(ii) while states derive their power to levy taxes from the Constitution, panchayats derive the same from the state legislatures, resulting in an absence of bargaining power,
(iii) a further dilution of the autonomy of panchayats,
(iv) a further weakening of rural governance, and
(v) greater obstacles in the delivery of basic services.
It is surprising to note that despite Article 243G of the Constitution designating panchayats as “institutions of self-government,” Section 2 (69) of the Central Goods and Services Tax (CGST) Act, 2017 classifies them as “Local Authorities.” This undermines the very existence of the panchayats as a form of government. The CGST Act further undermines the purpose of the 73rd and 74th amendments to the Constitution, as it leads to the centralization of the financial powers. An added insult to injury is that some taxes levied by these local governments have been subsumed under the GST. On the one hand, panchayats have been criticized for failing to raise their own resources, while on the other, they have been discouraged from doing so because the governments at Delhi and the state capitals want them to function merely as agencies to implement their programme and schemes.
In view of the above, the following measures may be considered to ensure that panchayats remain the de facto institutions of self-government, and one of the stakeholders in the implementation of the GST. First, in order to strengthen cooperative federalism in the context of GST, panchayats should be represented on the GST Council, which will allow them to air their grievances and argue for a fair share of the consolidated funds. This is important because according to the 11th Schedule of the Constitution, panchayats are required to adjudicate on 29 matters under their purview.
This platform would enable them to present developmental plans on these subjects before the council for devolving requisite funds to them to meet their constitutional requirements of developing rural economy and society. Second, services provided by panchayats in the context of the functions entrusted to them under Article 243G of the Constitution are beyond the jurisdiction of the GST. In this context, a proper activity-mapping of assigned functions to panchayats has to be carried out, in order to impose taxes, or service or user charges. The panchayats have to come out of their existing practice of supply-side decentralization, which is, only expending funds received from the higher tiers of the government, as opposed to mobilising their own resources.
Third, according to Article 243H of the Constitution, the state legislatures may “authorise a panchayat to levy, collect, and appropriate such taxes, duties, tolls and fees, in accordance with such procedure and subject to such limits.” Taking the cognizance of this article, the state finance commissions must conduct studies on the potential of such taxes, duties or fees which could be imposed by the panchayats under their jurisdiction. Fourth, in order to meet the requirements of the GST, panchayats have to put their own houses in order, in terms of developing requisite infrastructure, including panchayat office buildings, and recruiting personnel, as well as capacity-building of officials and non-officials engaged in the functioning of panchayats. It is essential that the elected representatives of panchayats, numbering at more than three million, organise themselves to demand devolution of powers and authority from their respective state governments and the centre, in order to function effectively as local governments. Their exclusion from the GST fold may be an opportune moment to mobilise local panchayat leaders, and assert themselves as formidable institutions of self-government.
By: Abhishek Sharma ProfileResourcesReport error
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