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. |