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The introduction of the GST has significantly eroded the financial freedoms of Indian States, according to K.N. Harilal, Chairman of the 7th State Finance Commission. Speaking at a seminar on Centre and State Budgets organised by the Public Policy Research Institute (PPRI), the Institute of Parliamentary Affairs and the Economics Department of the University College, Prof. Harilal expressed concern over the growing fiscal imbalance between the Union and the States. Indirect Tax Control Conce
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FAQ :
K.N. Harilal, Chairman of the 7th State Finance Commission, stated that the GST regime has significantly eroded the financial freedoms of Indian states.
The GST framework has reduced states' financial manoeuvrability because the Union government unilaterally determines indirect taxes, centralising tax powers and restricting states' ability to respond to regional economic needs.
The Centre's increasing reliance on cesses and surcharges, which are not shared with states under the divisible pool mechanism, has further weakened states' fiscal space.
There is concern over the stagnation of social security pensions at the Central level, with the old age pension last revised in 2006 and the pension for those over 80 remaining unchanged since 2011.
Experts suggest a reassessment of Centre-State financial relations, fiscal federalism, and revenue-sharing mechanisms in the evolving GST era.
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