Financial Relations
Distribution of Revenue & Wealth
PART I — ALLOCATION OF RESOURCES
TAXATION POWERS
The Three Lists
- **Union List:** Major taxes (Income tax, Customs, Corp tax).
- **State List:** Local taxes (Land revenue, Liquor, Tolls).
- **Concurrent List:** NO tax powers (only minor fees).
- **Residuary:** Union holds residuary tax powers.
ARTICLE 280
Finance Commission
- Quasi-judicial body, set up every 5 years by President.
- Recommends distribution of net tax proceeds.
- **Vertical:** Center to States ratio.
- **Horizontal:** State to State allocation formula.
PART II — GRANTS & INTEGRATION
ARTICLES 275 & 282
Grants-in-Aid
- **Statutory (Art 275):** Based on FC recommendation. Given to states in need of assistance. Charged on Cons. Fund.
- **Discretionary (Art 282):** Union or State can make grants for any public purpose (no FC needed).
101ST AMENDMENT
GST Framework
- **Article 246A:** Concurrent power to both Parliament and State legislatures to make laws on GST.
- Shift from origin-based to **destination-based** consumption tax.
- **Article 279A (GST Council):** Joint forum of Center & States.
- Drives consensus on tax rates, exemptions, and thresholds.
- "One Nation, One Tax, One Market."
Return to Index: Indian Polity