The distribution of tax resources between the Union government and the state governments in India is governed by the provisions outlined in Article 268 to Article 279 of the Constitution. These articles define the specific taxes and duties that are assigned to each level of government.
Article 268: Taxes levied and collected by the Union but assigned to the states
- Taxes such as stamp duties on transactions related to bills of exchange, promissory notes, and other instruments are levied and collected by the Union government.
- However, the net proceeds of these taxes are assigned to the state governments.
Article 269: Taxes levied and collected by the Union but distributed between the Union and the states
- Taxes on the sale or purchase of goods in the course of interstate trade or commerce, known as the Central Sales Tax, are levied and collected by the Union government.
- The proceeds from these taxes are distributed between the Union and the states based on principles and formulas prescribed by Parliament.
Article 270: Taxes levied and collected by the Union and assigned to the Union
- Taxes such as income tax, customs duties, central excise duties, and service tax are levied and collected by the Union government.
- The entire proceeds of these taxes are assigned to the Union government.
Article 271: Surcharge on certain duties and taxes for the purposes of the Union
- The Union government may levy and collect surcharges on certain taxes and duties for specific purposes.
- The proceeds from these surcharges are exclusively used for the purposes of the Union government.
Article 272: Grants in lieu of export duties
- The Union government may provide grants to the states in lieu of the share they would have received from export duties on jute and jute products
Article 273: Grants for specified purposes to certain states
- The Union government may provide grants to states that are in need of assistance for promoting the welfare of Scheduled Tribes, raising the level of administration in the Scheduled Areas, or any other purpose as specified by Parliament
Article 274: Prior recommendation of the President necessary for bills affecting taxation in which states are interested
- Any bill introduced in the Parliament that affects the taxation powers of the states requires the prior recommendation of the President
Article 275: Grants from the Union to certain states
- The Union government may provide grants-in-aid to certain states that are in need of financial assistance to meet their revenue deficits or for any other purpose as specified by Parliament.
