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In recent years, some southern Indian states like Karnataka and Tamil Nadu have voiced concerns that they contribute the lion’s share of India’s GST collections but receive less in return from the Centre. On the other hand, historically mineral-rich states like Bihar and Jharkhand supplied natural wealth for national development—often without proportional benefits.
The GST Debate: Modern Resistance to Fiscal Centralisation
Under the Goods and Services Tax (GST) regime, India adopted a unified indirect tax structure in 2017. While GST was meant to simplify taxation and ensure a uniform market, it also triggered debates on fiscal federalism.
States like Karnataka argue that they contribute significantly to national revenue, but when it comes to sharing that revenue through Finance Commission grants or centrally sponsored schemes, the returns are disproportionately low.
"We contribute more, but get less."
This discontent has even led to fringe digital boycotts of apps like PhonePe and GPay, with users asking—"Why should we pay GST if our state gets nothing back?"
The Constitutional Framework
According to Article 270 of the Constitution (as amended), GST is shared between the Union and the States based on the recommendation of the Finance Commission. The aim is equity—ensuring that poorer states also receive adequate resources.
But southern states argue that the formula, which includes population data and not just contribution, ends up punishing efficient states that have controlled population growth and built stronger economies.
Historical Compliance: Minerals Without Protest
Now compare this to post-Independence India. The Centre adopted a centralised economic model where minerals like coal, iron ore, bauxite, and mica—mostly from Bihar, Jharkhand, Odisha, and Chhattisgarh—were declared national assets. These were supplied at uniform prices across India, regardless of where the factory was built.
So, an industrialist in Maharashtra or Tamil Nadu could buy Jharkhand’s iron ore at the same rate as someone setting up a plant next to the mine. The cost of transporting minerals, the environmental damage, and the displacement of tribal communities—all of it was borne locally. But the jobs, factories, and profits flowed elsewhere.
"The people of Bihar and Jharkhand did not boycott this policy. They complied. Silently. And perhaps, tragically."
A Counterfactual: What If They Had Resisted?
Ironically, today’s digital payment resistance is a form of micro-economic protest—an attempt to reclaim fiscal control, even if rooted in misinformation. But it forces us to ask:
What if they had said: “No minerals unless the factories are built here”?
Would Tamil Nadu or Maharashtra still have become the industrial magnets they are today?
This contrast between historical compliance and contemporary resistance reveals deeper questions about our development model, federal priorities, and the long-term impact of regional silence.
Legal and Moral Takeaways
- Natural resources are constitutionally held in trust by the State (Article 39(b)), meant for equitable distribution of wealth.
- Fiscal transfers under Article 280 and Finance Commission recommendations must be based not just on need, but also contribution and cost of compliance.
- Equity vs Equality: Justice demands not uniformity, but recognition of sacrifice, performance, and historical contribution.
Conclusion
As India evolves, the law must catch up with regional realities. Compliance should not be a curse, and resistance must not always be ridiculed. A new fiscal federalism—one that respects both the silent giver and the vocal dissenter—is the only path to balanced growth.
That’s a wrap for today. I’ll return next week with another judgment that could change the game!
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– Anupama
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Written by: Anupama Singh | Legal Blogger
The Legal Trifecta: IPR | Cyber Law | Property Law
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