Q. Consider the following statements:
1.The financial transfers through Centrally Sponsored Schemes (CSS) and Central Sector Schemes (CSec) are statutory transfers to the states.
2.The Finance Commission has been granted the power by the Constitution to recommend the distribution of net tax revenues among the states.
3.The share of states in the gross tax revenue has decreased in recent years.
How many of the statements given above are correct?
Explanation –
Statement 1 is incorrect. Net Tax Revenues and Grant-In Aids form the two statutory transfers to the states by the Central Government. The financial transfers through Centrally Sponsored Schemes (CSS) and Central Sector Schemes (CSec) are non-statutory transfers to the states. Statutory transfers refer to payments mandated by law or statute while non-statutory transfers refer to payments that are not mandated by law.
Statements 2 and 3 are correct. The Finance Commission is a constitutional body established by the President under Article 280 of the Constitution. The Commission’s primary responsibility is to evaluate the state of finances of the Union and State Governments. The functions of the Finance Commission as mandated by the Constitution are to make recommendations on a) the distribution between the Union and the States of the net proceeds of union taxes, b) the distribution between the States of their respective shares and c) the principles which should govern grants-in-aid to the States. The share of states in the gross tax revenue (total tax revenue collected, which includes cess and surcharges) has decreased from 35% in 2015-16 to 30% in 2023-24.
Source: Forum IAS
