Equitable distribution: PAC recommendations on GST reforms, Pg 8

PAC's Criticism of GST Regime

• PAC flags drop in indirect tax revenue (FY18FY20) and non-finalisation of Compensation Fund for states.
• Report calls Centres audit approach "lackadaisical", highlighting 2,447 inconsistencies worth ?32,577 crore.

Federal Concerns of States

• GSTs centralised nature affecting fiscal autonomy.
• States unhappy with delayed/insufficient compensation, especially manufacturing-heavy states.

Structural Recommendations

• Need for formal mechanism with CAG for timely audits.
• Suggests comprehensive review to develop GST 2.0 for improved equity and transparency.

Analysis & Way Forward

• Strengthening federal cooperation and institutional audit processes can restore trust in GST architecture.
• Fiscal transparency and guaranteed timelines for state compensation essential.

Mains Mock Question:

"Evaluate the effectiveness of the GST regime in addressing the fiscal concerns of States. Suggest reforms to strengthen cooperative federalism."