Strengthening Fiscal Federalism: Inter-State Council Proposes Permanent Secretariat for GST Council

The Inter-State Council (ISC), in its latest 2026 recommendations, has proposed a significant structural reform to India’s fiscal architecture: the establishment of a permanent administrative secretariat for the Goods and Services Tax (GST) Council. This proposal aims to address the persistent friction between the Union and State governments regarding fiscal matters, particularly the distribution of revenue and the extension of the compensation cess.

Since the inception of GST, the GST Council has functioned as a unique experiment in cooperative federalism. However, the lack of a dedicated, permanent administrative body has often led to delays in addressing state-specific grievances. The ISC’s recommendation includes the creation of a specialized legal cell within this secretariat. This cell would be tasked with handling complex disputes related to revenue sharing formulas and the legalities of the compensation regime, which have historically been flashpoints in Centre-State relations.

The move is significant for several reasons. First, it institutionalizes the dispute resolution process. Currently, many fiscal disagreements are settled through political negotiations or remain unresolved, leading to trust deficits. A permanent secretariat provides a technical and administrative platform for continuous dialogue. Second, the legal cell would offer a quasi-judicial framework to interpret GST laws and council decisions, potentially reducing the burden on the judiciary. This aligns with the long-standing demand of several states for a more transparent and predictable mechanism to settle financial disagreements.

For governance, this represents a shift towards 'Institutionalized Federalism.' By providing States with a formal channel to contest revenue projections and cess allocations, the Union demonstrates a commitment to the spirit of Article 263 (Inter-State Council) and Article 279A (GST Council). It ensures that the 'One Nation, One Tax' regime is supported by a robust administrative mechanism that can withstand political cycles and economic volatility.