This article is written by Mr. Aryan Kadam. He is a student at Symbiosis College of Arts and Commerce, Pune.
Introduction
The Goods and Services Tax (GST) was introduced as India’s one of the most ambitious fiscal reforms, aimed towards merging the national market while maintaining the constitutional balance between the Union and the States. Rooted in the theory of cooperative federalism, GST required both levels of government to waive significant taxing powers in favour of a shared framework. Nearly a decade later, disputes arising from GST implementation reveal a growing strain on this cooperative model. The absence of an effective dispute resolution mechanism, coupled with increasing centralisation and judicial intervention, has raised some serious questions about whether cooperative federalism under GST is functioning as it was intended to.
This blog critically examines the GST dispute resolution mechanism, the constitutional framework behind it, and the challenges that have pushed cooperative federalism into a state of crisis.
Constitutional and Institutional Framework
The constitutional backbone of GST lies in Article 246A and Article 279A of the Constitution of India. Article 279A establishes the GST Council, proposed as a collaborative forum where the Union and States jointly make recommendations on GST rates, exemptions, and procedures. Importantly, Article 279A(11) mandates the creation of a dispute resolution mechanism to adjudicate disputes arising out of the Council’s recommendations or their implementation.
The intent was clear: disagreements would be resolved institutionally through dialogue and adjudication, rather than adversarial litigation. In theory, this framework balanced fiscal unity with federal autonomy. In practice, the mechanism has remained underdeveloped.
The Missing Dispute Resolution Mechanism
Despite the constitutional mandate, a dedicated and independent GST dispute resolution body has not been fully operationalised. The assumption that consensus within the GST Council would prevent disputes underestimated the political and fiscal realities of Indian federalism. Conflicts have emerged over issues such as on the compensation to States, rate rationalisation, and administrative control.
In the absence of a functional mechanism under Article 279A(11), States are left with a very limited option, often resorting to political negotiation or constitutional litigation. This undermines the very idea of cooperative federalism, replacing structured resolution with ad hoc bargaining.
Centralisation and the Erosion of State Fiscal Autonomy
One of the most debatable aspects of GST has been the perception of increasing centralisation. Due to implementation of GST, States surrendered significant independent taxing powers, particularly over indirect taxes, in exchange for assured compensation and
shared decision-making. Delays and disputes relating to compensation payments have intensified Centre–State tensions, especially during periods of economic stress.
Also, enforcement and administrative control under GST often appear tilted towards the Union, leading to concerns that States have become implementers rather than equal partners. This shift contradicts the federal bargain that underpinned GST’s adoption.
Taxpayer-Level Disputes and Judicial Overload
Beyond inter-governmental disputes, GST has also generated extensive litigation at the taxpayer level. Advance Ruling Authorities (ARAs), intended to provide certainty, frequently issue conflicting rulings on identical legal questions across different States. The absence of a robust and timely appellate structure has only deepened uncertainty.
The delayed establishment and functioning of the GST Appellate Tribunal has forced taxpayers to approach High Courts directly. This has resulted in inconsistent interpretations of GST law, increased compliance costs, and forum shopping, all of which weaken the credibility of the tax regime.
Cooperative Federalism in Crisis
Cooperative federalism depends not merely on constitutional text but on mutual trust and institutional respect. GST disputes highlight a widening trust deficit between the Union and the States. Repeated GST Council meetings without resolution of core disagreements have led to dialogue fatigue, while one-sided policy decisions have fuelled perceptions of dominance.
It is a failure to operationalise credible mechanisms for conflict resolution within a federal structure.
The Way Forward
Firstly, the dispute resolution mechanism under Article 279A(11) must be operationalised through clear legislation. The body should be independent, time-bound, and should be legally capable of delivering binding decisions on Centre State and inter-State disputes.
Second, the GST Appellate Tribunal must be strengthened with adequate benches, streamlined procedures, and technological integration to ensure uniform interpretation of GST law across jurisdictions.
Third, administrative powers between the Union and States need a clearer division to reduce overlap and institutional friction. Transparency in GST Council decision-making, including the publication of detailed reasoning, can also help rebuild the trust
Conclusion
GST originated as more than just a tax reform; it was a constitutional experiment in cooperative federalism. The constantly growing volume of disputes and the absence of effective resolution mechanisms indicate that this experiment is under tremendous strain. Restoring faith in GST requires respecting both the spirit and structure of federalism, where cooperation is supported by credible institutions for resolving conflict.
Until such reforms are undertaken and implemented , The GST will continue to reflect the paradox of Indian federalism: ambitious in vision, but fragile in execution.