States' unhappiness index on the rise

Centre's proposals on settling states' demand for GST compensation can throw up new challenges

Some states are unhappy over the manner in which the Centre has tried to meet their demand for compensation for the loss of revenues from the goods and services tax (GST) in 2020-21. This has already become a major dispute between the Centre and some states. How this is resolved will determine not only the future of the country’s biggest indirect taxes reform, but also the character of Centre-state fiscal relations and indeed the shape of federalism in India.

The broad nature of the dispute is as follows. The Centre has calculated that the revenue loss for the states, based