Indian Taxation and Indian Federal Finance System. GST Included

1. A P R E S E N T A T I O N
B Y
S U R A N J A N J E E T
M . A . I ( P U B L I C A D M I N I S T R A T I O N )
CENTRE – STATE
FINANCIAL RELATIONS

3. LEARNING OUTCOMES
• Forms Of Government
• Types Of Financial Systems
• Indian Financial System (Centre State Relations)
• On what sources can the Central Govt. Levy Taxes Upon?
• On what sources can the State Govt. Levy Taxes Upon?
• On what sources can the Local Bodies Levy Taxes Upon?
• How Is the Revenue collected via means of Taxation, distributed between Centre and States?
• CONCLUSION - How is such a system helping our country? Its Benefits.

4. LET’s START FROM THE ROOTS….
Forms of
Government
Unitary
Political Power is
Centralized
Federal
Political Power is
distributed among
centre, state and
local bodies.

5. SIMILARLY,
Financial Systems
Unitary Finance
Where, only the
Central government
spends all the items
of expenditure in the
country and the
revenue from all the
sources also goes to
the central exchequer
Federal Finance
Where, all the items of
revenue & expenditure
are divided among the
Centre, state and local
bodies. respective
sources.

6. Features of Federal Financial System;
 Sources of income and expenditure are distributed between the central
and state government.
 The jurisdictions and rights are clearly mentioned in the constitution.
 Sources of income and expenditure are different for the central and state
government.
 Although, state government has some administrative autonomy, yet they
remain subordinate to the centre.
 Disputes are resolved via constitution
THEREFORE, INDIA FOLLOWS A FEDERAL FINANCE SYSTEM…

7. FEDERAL FINANCE IN INDIA
India is a federal country as per its constitution.
There is an allocation of resources between centre and states.
There is a clear mention regarding financial powers in the
constitution and according to which, there are three types of
lists ;

9. UNION STATE FINANCIAL RELATIONS
 A268-A293 Part XII of the Constitution.

10. 1. DISTRIBUTION OF TAXES
 The 80th Amendment of 2000 was enacted to give effect to the
recommendations of the 10th Finance Commission.
 The commission recommended that out of central taxes and duties 29%
should go to the states
 ALTERNATIVE SCHEME OF DEVOLUTION, came into effect
 The 88th Amendment added new article 268-A dealing with service
tax. Also inserted new subject to union list Service tax (92-C).Levied by
center but collected and appropriated by both union and state

11. ARTICLE 268 -- TAXES LEVIVED BY CENTER BUT COLLECTED AND
APPROPRIATED BY STATE;
The proceeds of these duties levied within any state do not form part of the
consolidated fund of India but are assigned to that state.
ARTICLE 268 A-- SERVICE TAX LEVIED BY THE CENTRAL GOVT.
BUT COLLECTED AND APPROPRIATED BY CENTER AND STATES;
The principles of appropriation are formulated by Parliament.
ARTICLE 269 -- TAXES LEVIVED AND COLLECTED BY CENTRE BUT
ASSIGNEED TO THE STATE;
Taxes on sale of purchase of goods in course of inter-state trade and commerce.
Taxes on the consignment of goods in the course of inter-state trade or commerce.
Principles laid down by Parliament.
ARTICLE 270 -- TAXES LEVIVED AND COLLECTED BY CENTRE BUT
DISTRIBUTED BETWEEN THE CENTRE AND STATES;
All taxes in the union list except: Duties and taxes referred in A268,A268-
A,A269,A271 and any cess levied for special purpose. Distribution is prescribed by
President of India On the advice of Finance commission.

12. ARTICLE 271 –SURCHARGE ON CERTAIN TAXES AND
DUTIES FOR THE PURPOSE OF CENTER;
Parliament can levy surcharges and duties as mentions in A269 and A270.Goes fully
to union.
TAXES LEVIED AND COLLECTED AND RETAINED BY THE STATES;
Enumerated in state list ~ 20 in numbers. tolls,capitation,fees,sales tax,land revenue,
excise duties, tax on agri income etc.

13. 2. DISTRIBUTION OF NON – TAX
REVENUE
Posts, telegraph,
banking,
broadcasting,
railways, coinage
currency, psu`s,
escheat and lapse.
CENTRE
Irrigation, forests,
fisheries, psu`s
(state), escheat and
lapse
STATE

14. 3. GRANTS-IN –AID TO THE STATES

15. 4. OTHER TAXES

19. CONCLUSION
(How is our financial system
beneficial? )

20. Benefits
of
Federal
Finance
Independence
&
Responsibility
Transfer
Adequacy &
Elasticity
Accountability
Administrative
Efficiency
Mutual
Relation and
Coordination
Uniformity
Flexibility

21. THEREFORE, OUR FISCAL /FINANCIAL
SYSTEM IS,
 Financially disciplined
 Efficient
 Away from double taxation
 Away from disputes