Q. Consider the following statements regarding the financial relations between the Centre and the States in India:
1.The Constitution provides for a Finance Commission to recommend the distribution of taxes between the Union and the States.
2.The Grants-in-Aid to States are provided under Article 275 of the Constitution.
3.States have exclusive power to levy tax on inter-state trade.
Which of the statements given above is/are correct?
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: A
Notes:

Explanation:

  • Article 280 of the Constitution provides for the formation of a Finance Commission every five years to recommend the distribution of net proceeds of taxes between the Centre and the States.
  • Under Article 275, the Parliament may provide for grants-in-aid to States in need of financial assistance, especially to support tribal welfare or developmental needs.
    States do not have the power to levy tax on inter-state trade.
  • Under the Goods and Services Tax (GST) regime and Article 269A, the Centre levies and collects IGST (Integrated GST) on inter-state supplies, which is then apportioned between the Centre and the States based on the recommendations of the GST Council.

Source: Laxmikant

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