• UGI USER
  • Feb 23, 2024
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ON FINANCIAL DEVOLUTION AMONG STATES

Why in the news?

  • Opposition-ruled states, particularly in South India, argue for fairer financial devolution under the present scheme.
  • Concerns raised over disproportionate tax revenue receipt compared to contribution.

Highlighting the Role of Finance Commission:

  • The Constitution’s Article 270 governs the distribution of net tax proceeds between the Centre and States.
  • Finance Commission (FC), constituted every five years, recommends division of taxes and grants among states.
What are the Constitutional Provisions related to centre state financial relations:

·    Constitutional Framework:

o   Part XII of the Constitution governs financial relations.

o   Articles 268 to 293 detail tax distribution, borrowing, and grants.

o   Article 270 Overview:

Outlines distribution scheme of net tax proceeds.

·    Grants-in-Aid:

o   Article 275 enables discretionary fund transfers from Centre to States.

·    Finance Commission:

o   The Constitutional body under Article 280 advises on tax distribution, fiscal discipline, and financial resource enhancement for States.

·    Seventh Schedule Overview:

o   Divides taxation powers between Centre and States.