TOPIC INFO (UGC NET)
TOPIC INFO – UGC NET (Economics)
SUB-TOPIC INFO – Indian Economy (UNIT 10)
CONTENT TYPE – Detailed Notes
What’s Inside the Chapter? (After Subscription)
1. Financial Relations Between Centre and States
1.1. Constitutional provision
1.2. Distribution Of Non-tax Revenues
1.3. How States Get Grant-in-aids From The Centre?
1.4. GST Regime – 101st Amendment to the Constitution
1.5. Protection Of Interest Of The States
1.6. Effects Of Emergencies
2. Finance Commissions of India
2.1. Historical Background
2.2. Composition
2.3. Tenure of Finance Commission
2.4. Functions of the Finance Commission
2.5. Implementation of the Recommendations
3. Fiscal Responsibility and Budget Management (FRBM) Act
3.1. Background
3.2. Objectives of the FRBM Act
3.3. Key features of the FRBM act
3.4. Recommendations of N.K.Singh Committee
3.5. Escape Clause in FRBM Act
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Centre-State Financial Relations and Finance Commissions of India
UGC NET ECONOMICS
Indian Economy (UNIT 10)
Financial Relations Between Centre and States
Financial relations between the Centre and states are given in articles 268 to 280 of the Constitution of India. Financial relations between the union and the states are derived from the Government of India Act, of 1935. The areas of taxation have been clearly demarcated between the centre and states. The states have little power in taxation and are heavily dependent on the centre, for financial resources. The chief source of finance of the states is the grants-in-aid from the Centre. The central-state financial relationship has undergone substantial changes after the passage of the 101st amendment which introduced the Goods and Services Tax (GST) in India.
Constitutional provision
Article 268:
- Article 268 deals with stamp duty levied by the Union but collected and distributed by the States.
- These taxes are not included in the Consolidation Fund of India and are allocated to the state in which they are levied, so they do not contribute to the Indian Consolidation Fund.
- With the 88th amendment to the Constitution, a new provision 268 A was included in this article, which included the tax on services in its ambit, but it was again excluded by the 101st Amendment to the Constitution with the introduction of GST.
Financial relations between the Centre and states are elaborated in Articles 268 to 280 of the Constitution of India. |
Article 269:
- Taxes on the sale or purchase of Goods in the course of inter-state trade.
- Taxes on the consignment of goods in the course of inter-state trade or commerce.
- They are assigned to the concerned states. Therefore net proceeds of these taxes do not form a part of the consolidated fund of India.
Article 269 A:
The 101st Constitutional Amendment introduced a new provision 269A, which introduced a number of significant changes.
Article 269A (1) mainly deals with the following aspects:
Taxation and collection of tax on goods and services (GST).
- This is applicable in the case of Inter-state trade or commerce.
- The collected taxes will be distributed between the states and the Union.
- Parliament has the power to pass legislation on the distribution of taxes levied in accordance with this article, in accordance with the recommendations of the GST Council.
- Goods and Services Tax (GST) on supplies in interstate trade or commerce levied and collected by the Center; however, the net proceeds is divided between the Center and the states, as in manner provided by parliament in accordance with the recommendations of the GST Council.
- Parliament is also empowered to develop guidelines for where and when the supply of goods or services, or both, takes place in the course of interstate trade or commerce.