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Question

Difficulty: MediumFiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure

Regarding the constitutional provisions governing the distribution of revenues and taxation powers between the Union and the States in India, which of the following statements are correct?

  1. Stamp duties on bills of exchange and promissory notes are levied by the Union government but collected and appropriated by the States.Answer
  2. B
    Integrated Goods and Services Tax (IGST) on inter-State trade is levied and collected by individual States and directly retained by the originating State.
  3. Surcharges levied by Parliament for Union purposes under Article 271 do not form part of the divisible pool of taxes shared with States.Answer
  4. D
    Corporation tax receipts are entirely excluded from the net proceeds of central taxes shared with States under Article 270.

Answer

The correct statements are that stamp duties on negotiable instruments are levied by the Union but collected and appropriated by the States, and that surcharges levied under Article 271 for Union purposes do not form part of the divisible tax pool shared with States.
The statements confirming that stamp duties on negotiable instruments are levied by the Union but collected/appropriated by States (Article 268) and that Union surcharges under Article 271 are excluded from the divisible pool are accurate under Indian constitutional fiscal federalism.

Step-by-Step Solution

1
Examine the constitutional framework for duties levied by the Union but collected by States under Article 268.
Confirm that stamp duties on bills of exchange, cheques, and promissory notes are levied by the Union government but collected and appropriated by the States.
Article 268 explicitly outlines duties levied by the Union but collected and assigned to the States.
2
Analyze the levying authority and mechanism for Goods and Services Tax on inter-State supply under Article 269A.
Identify that IGST is levied and collected by the Government of India (Union) and then apportioned between the Union and States, contradicting the claim that States levy and retain it directly.
Article 269A establishes central administration for inter-State GST to ensure single-window compliance and structured revenue distribution.
3
Verify the composition of the divisible pool of taxes under Articles 270 and 271.
Confirm that surcharges under Article 271 are earmarked for Union purposes and excluded from devolution, while Corporation tax is included in the divisible pool under Article 270.
Since the 80th Amendment Act, all central taxes (including Corporation tax) except cesses and surcharges form part of the divisible pool.

Key Concept

Constitutional provisions for distribution of tax revenues between the Union and States (Articles 268, 269A, 270, and 271)
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Topics

Fiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure