The Justice Kurian Joseph Committee has recommended sweeping reforms to India's Goods and Services Tax framework, advocating for what it terms 'GST 2.0' to address the growing fiscal imbalance between the Centre and states. The committee's report highlights that several states face severe revenue shortfalls since the expiry of the compensation guarantee in June 2022.
States like Punjab and Kerala have reported revenue shortfalls of 36% to 50% compared to pre-GST projections. The committee notes that the current GST Council voting structure, where the Union Government holds an effective one-third veto, has undermined cooperative federalism principles enshrined in the Constitution.
Key recommendations include a rotational chairmanship for the GST Council instead of the current system where the Union Finance Minister permanently chairs it. The committee also proposes limited State GST rate flexibility, allowing states to set rates within a narrow band for select items to address regional economic disparities.
The report describes the current centralized execution of GST as creating an 'unsustainable fiscal imbalance' and argues that GST 2.0 is not merely a technical requirement but a constitutional necessity to move from coercive fiscal federalism to a genuine partnership model between the Centre and states.