Actual Article
Article 270: Taxes levied and distributed between the Union and the States
- All taxes and duties referred to in the Union List, except the duties and taxes referred to in Articles 268 and 269, surcharge on taxes and duties referred to in Article 271, and any cess levied for specific purposes under any law made by Parliament, shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2).
- Such percentage, as may be prescribed, of the net proceeds of any such tax or duty in any financial year as is attributable to the States shall not form part of the Consolidated Fund of India but shall be assigned to the States within which that tax or duty is leviable in that year and shall be distributed among those States in accordance with such principles of distribution as may be formulated by Parliament by law.
- Parliament may by law formulate principles for determining the net proceeds of any tax or duty, and for distributing such proceeds among the States.
UPSC Notes for Article 270
Explanation:
- Levy and Collection: Clause (1) specifies that all taxes and duties mentioned in the Union List, except those covered under Articles 268, 269, and 271, are levied and collected by the Government of India.
- Distribution of Proceeds: Clause (2) states that a prescribed percentage of the net proceeds of such taxes and duties, as determined by Parliament, shall be assigned to the States and distributed according to principles formulated by Parliament.
- Principles of Distribution: Clause (3) empowers Parliament to formulate principles for determining the net proceeds and for distributing them among the States.
Key Points:
- Revenue Sharing: Article 270 ensures a structured system for sharing the revenue from Union taxes and duties between the Union and the States.
- Legislative Oversight: The principles for distribution of tax proceeds are formulated by Parliament, ensuring a fair and equitable distribution among the States.
- Fiscal Federalism: This article strengthens fiscal federalism by ensuring that the States receive a share of the revenue from Union taxes, supporting their financial needs.
Important Cases and Commissions Related to Article 270
Cases:
- No specific landmark cases directly interpreting Article 270, as it primarily deals with revenue sharing and distribution principles formulated by Parliament.
Commissions:
- Finance Commission: Reviews and recommends the distribution of tax revenues between the Union and the States, including those covered under Article 270.
- N.K. Singh Commission (Fifteenth Finance Commission): Provided detailed recommendations on revenue sharing between the Union and the States, considering the provisions of Article 270.
Important Reports Related to Article 270:
- Finance Commission Reports: Provide detailed analysis and recommendations on the allocation of revenues from Union taxes and duties to the States.
- Reports on Fiscal Federalism: Discuss the impact of revenue sharing mechanisms on the financial autonomy of States and the principles of equitable distribution.
Previous Year Prelims Questions Related to Article 270
- (UPSC Prelims 2016) What does Article 270 of the Indian Constitution pertain to?
- A. Taxes on income
- B. Taxes levied and distributed between the Union and the States
- C. State List subjects
- D. Financial emergency provisions Correct Answer: B. Taxes levied and distributed between the Union and the States
- (UPSC Prelims 2018) According to Article 270, who formulates the principles for distributing the proceeds of Union taxes among the States?
- A. The President
- B. The Prime Minister
- C. The Parliament
- D. The Finance Minister Correct Answer: C. The Parliament
Previous Year Mains Questions Related to Article 270
- Mains 2016: “Discuss the significance of Article 270 in the context of fiscal federalism in India. How does it ensure equitable distribution of tax revenues between the Union and the States?”
- Mains 2019: “Evaluate the impact of Article 270 on the revenue-sharing mechanisms between the Union and States. What are the advantages and challenges associated with the distribution of Union tax proceeds?”
Additional Insights:
- Enhancing State Revenues: Article 270 plays a crucial role in enhancing state revenues by ensuring that a share of Union taxes is assigned to the States, supporting their financial stability and autonomy.
- Legislative Control: The role of Parliament in formulating distribution principles ensures a transparent and equitable system for sharing tax revenues, promoting trust and cooperation between the Union and the States.
Understanding Article 270 is crucial for UPSC aspirants as it provides insights into the mechanisms of revenue collection and distribution, emphasizing the principles of fiscal federalism and state financial autonomy. This knowledge is essential for both preliminary and main examinations, offering a comprehensive understanding of the financial provisions and revenue-sharing mechanisms within the Indian Constitution.