Examining Structural Rigidities & Institutional Challenges In India’s GST: A Comparative Economy Analysis

Abstract

The most transformative economic reform that occurred in India’s history after independence is the emergence of the Goods and Services Tax in 2017. Emerged after the 101st amendment to the Constitution, the main focus of GST is to integrate the diverse indirect tax framework into a comprehensive, harmonized, and destination-based tax structure. Promising improved efficiency, accountability, and harmonized unionism, several structural inflexibilities and institutional limitations have been identified after its implementation and execution. This study offers a comparative analysis of the GST framework in India, analyzing the role of administrative efficiency, collaborative governance, and political negotiations in its proper execution. The paper highlights the hybrid institutional framework with centralized bureaucratic authority and decentralized political bargaining through the GST Council. This framework encompasses the principle of collaborative federalism but at the same time highlights the rigidities and limitations like diverse rate structures, implementation difficulties, and uneven power sharing between the Centre and the state. The main objective of the compensation system was to uphold and sustain State finance, but it has pinpointed the conflicts between administrative authority and fiscal independence. Comparing India’s GST framework with GST/VAT models of nations like Canada, Australia and New Zealand, the paper highlights the peculiar features of India’s framework, mainly the multiple-rate structure, federal coordinating body and digital compliance. With an efficient and well-organized GST system in nations like Australia, New Zealand, and Canada, the study aims to mention the hurdles of implementing the GST efficiently in India with a high level of informality, political rivalry, and conflicts. The study adopts a comparative framework that comprises theories like cooperative federalism, institutionalism, and fiscal federalism. It also highlighted the political conflicts and constitutional dependencies that create inflexibilities in the GST structure in India. The study concludes with the significance of cooperative federalism, rationalized tax rates, and dispute resolution mechanisms in reforming the GST ecosystem in India.