The implementation of the Goods and Services Tax (GST) in India on July 1, 2017, indeed marked a paradigm shift in centre-state relations, fundamentally altering both the financial and political dynamics of Indian federalism.

Financial Paradigm Shift:

1. Loss of Fiscal Autonomy for States: Before GST, states had significant autonomy in levying various indirect taxes like VAT, sales tax, entertainment tax, etc. GST subsumed these taxes, centralizing the power to tax goods and services. States lost their independent power to set tax rates and determine their tax base, which was a major source of their revenue.
2. Revenue Sharing Mechanism: Under GST, revenue is shared between the Centre (CGST) and States (SGST), with an Integrated GST (IGST) for inter-state transactions, which is then apportioned. This new sharing mechanism, while ensuring a share for states, makes them more dependent on the central government for their revenue flows and the efficiency of the GST collection system.
3. Compensation Mechanism: To allay states' fears of revenue loss, a compensation mechanism was put in place for five years, guaranteeing states a 14% annual growth in GST revenue over the base year 2015-16. This compensation, funded by a cess on certain goods, created a safety net but also highlighted the states' initial apprehension and reliance on central assurances.
4. Impact on State Budgets: States' ability to raise revenue independently has been curtailed, making their budgets more susceptible to the overall performance of the national economy and the decisions made by the GST Council.

Political Paradigm Shift:

1. GST Council as a New Federal Institution: The most significant political change is the creation of the GST Council, a constitutional body comprising the Union Finance Minister (Chairperson) and state finance ministers. This Council is empowered to make recommendations on all critical aspects of GST, including tax rates, exemptions, thresholds, and rules. Decisions are made by a three-fourths majority, with the Centre having one-third voting power and states collectively having two-thirds.
2. Cooperative Federalism in Practice: The GST Council embodies 'cooperative federalism' as it necessitates consensus-building and negotiation between the Centre and states on fiscal matters. It provides a common platform for states, irrespective of their political affiliations, to engage with the Centre and influence national tax policy. This institutionalized dialogue is a significant departure from previous unilateral central decisions on taxation.
3. Potential for Conflict: While promoting cooperation, the Council also has the potential for political friction. Disagreements over revenue sharing, compensation, and policy decisions can strain centre-state relations, as seen during the COVID-19 pandemic when states demanded extended compensation.
4. Reduced Scope for Competitive Federalism: With uniform tax rates across states for most goods and services, the ability of states to use tax incentives to attract investment has been significantly reduced, impacting competitive federalism.

In essence, GST has transformed states from independent tax-levying entities into stakeholders in a unified national tax system, with their fiscal health now more intertwined with central policy and the collective decisions of the GST Council. This has necessitated a new era of cooperative federalism, albeit with inherent challenges to state autonomy.