Question

Discuss about the financial releations of central government with state government

Answer 1

The Financial relationship between the Centre (Union) and the States is provided in the constitution. The constitution gives a detailed scheme of distribution of financial resources between Union and the States.

The Indian constitution makes a broad distinction between the power to levy a tax and the power to appropriate the proceeds of a tax. Thus, the legislature which levies a tax is not necessarily the authority which retains the proceeds of a tax levied.

The constitution grants the Union Parliament exclusive power to levy taxes on several items. The state legislatures enjoy similar power with regard to several other specified items. In general, the Union Parliament levies taxes on items mentioned in the union list while the state legislatures levy taxes on items mentioned in the state list.

The subjects on which the union government have the exclusive powers to levy taxes are:

customs duty,corporation tax,capital gains,surcharge on income tax,railway fares etc.