Question Q.14GS2GS2
How is the 'vertical' and 'horizontal' devolution of taxes to the states decided? Highlighting the concerns raised by some states regarding the devolution of taxes, suggest corrective measures.
Main Body
The 101st Constitutional Amendment & inserted article 279A - GST council along with the Finance Commission (Art 324) have ensured the financial viability of our governance structure. [Deciding on the Vertical Devolution of Taxes] (1) Finance Commission determines [with diagram showing CentreStateULB hierarchy] - Based on Centre's Revenue - Based on States need [Tagged: 15th FC provided for Devolution Vertically (41 devolution)(3.1 for new UT of J&K & Ladakh)]Also decide grants to local Self govt. [State Finance Commission] - StateLSG.
2GST council determine share of [NST] = [CGST] + [SGST]. It is decided by voting 1/2 rd centre & 2/3rd state. [Deciding the Horizontal Devolution of Taxes] b ITA also determined [with table showing UP, Bihar, Punjab by others, TN, Kerala] by the Finance Commission [with diagram showing factors into consideration] [Factors into Consideration] → Income Divide Distance IGST → Area → Population → Demographic progress [Taxes (15/1)] → forest & Ecology [Concerns raised by some State government] (1.) Vertical Imbalance : State feel after GST assumed low growth; loss of Revenue. (2.) Less & Surcharge - not part of Devolution (3.) Population as criteria [Tagged Kerala punished for investment in demography.] (4.) Nature of tied grants - limit flexibility
[Ways to Address] (1.) 16th Finance CommissionConsultation needed (2.) Less & Surcharge - part of Division pool (3.) GST council for better negotiation. (4.) Increase % age of Demographic Progress
241 words1 paragraphs
Conclusion
These measures can ensure better federalism and address state grievances regarding tax devolution, maintaining balance between centre and state fiscal autonomy.
21 words
Diagram
Hierarchical triangle diagram showing devolution structure: Centre at top, State in middle, ULB at bottom
Topper
SURABHI YADAV
AIR 142025
Subject & Paper
GS2GS2
Topic
Federal Structure - Functions, Responsibilities, Devolution of Powers and Finances
Centre-State Financial Relations
Vertical and horizontal devolution of taxes
Writing Stats
262
Total words
1
Paragraphs
analytical
Tone