Question

Which of the following statements regarding Article 270 are correct?

1. Article 270 governs the sharing of taxes between the Union and States, including proceeds from GST.

2. After the 101st Constitutional Amendment, Article 270 includes provisions for distributing revenue from Union taxes and GST.

3. The GST Compensation Cess is also shared between the Union and States under Article 270.

• A. 1 and 3 only
• B. 1 Only
• C. 1 & 2 only
• D. 2 & 3 only

Answer 1

Answer:

B. 1 Only

Article 270 of the Indian Constitution

• Article 270 deals with the distribution of taxes between the Union and the States. It outlines which taxes form part of the divisible pool and are to be shared.

Key Provisions and Amendments:

• Original Provision: Article 270 initially specified certain taxes that were to be levied and collected by the Union but assigned to the States.

• 101st Constitutional Amendment Act, 2016: This significant amendment, which introduced the Goods and Services Tax (GST), brought about substantial changes to Article 270.

• Inclusion of GST: Post-amendment, Article 270 now includes the Goods and Services Tax (GST) levied by the Union government, but the net proceeds of which are to be distributed between the Union and the States. This means that a portion of the revenue generated from GST is shared.

• Exclusions: It is important to note that certain taxes and duties are explicitly excluded from the ambit of Article 270. These typically include taxes and duties levied and collected by the Union but assigned to States (like certain stamp duties), duties levied by the Union for specific purposes and whose revenues are assigned to the States (like a share of the excise duty on vải), and surcharges levied for specific purposes.

• GST Compensation Cess: The GST Compensation Cess is levied by the Union government to compensate the states for any revenue loss due to the transition to GST. While GST itself is shared under Article 270, the GST Compensation Cess is generally not shared under Article 270. It is primarily meant for compensating the states.

Relevance to Union-State Financial Relations:

• Article 270 is a cornerstone of India's federal fiscal architecture, defining the financial interdependence between the Central government and the State governments.

• The sharing of taxes is a crucial mechanism that ensures states have adequate financial resources to carry out their functions.

• The 101st Amendment significantly altered this article to accommodate the GST regime, reflecting a major shift in indirect taxation in India.