Opposition MPs Demand Clarity on National Security Cess Allocation to States
Opposition MPs in the Rajya Sabha are seeking clarification on the allocation of funds collected through the National Security Cess to states, raising concerns about fiscal federalism.
Photo by Sleeba Thomas
त्वरित संशोधन
Opposition MPs in Rajya Sabha sought clarity on National Security Cess allocation.
The concern is whether cess funds are shared with states or retained by the Centre.
Cesses and surcharges are generally not part of the divisible pool of taxes.
दृश्य सामग्री
Central Tax Revenue Distribution: Divisible Pool vs. Cesses
This flowchart illustrates the distinct paths of central tax revenues, highlighting how cesses and surcharges are typically retained by the Central government for specific purposes, unlike the divisible pool of taxes which is shared with states as per Finance Commission recommendations. This clarifies the core issue raised by Opposition MPs.
- 1.Central Government Collects Taxes (Income Tax, Corporate Tax, GST-Centre's Share, etc.)
- 2.Identify Cesses & Surcharges (e.g., National Security Cess, Health & Education Cess)
- 3.Identify Divisible Pool of Taxes (Net proceeds of all Union taxes, excluding cesses/surcharges)
- 4.Cesses & Surcharges Funds
- 5.Divisible Pool Funds
- 6.Retained by Central Government for Specific Purposes (e.g., National Security)
- 7.Finance Commission Recommendations (Article 280)
- 8.Vertical Devolution to States (e.g., 41% for 2021-26)
परीक्षा के दृष्टिकोण
Constitutional provisions related to taxation and revenue distribution (Articles 268, 269, 270, 271).
Role and recommendations of the Finance Commission regarding divisible pool and grants.
Concept of fiscal federalism and its challenges in India.
Impact of cesses and surcharges on states' finances and financial autonomy.
Transparency and accountability in public finance management.
विस्तृत सारांश देखें
सारांश
In the Rajya Sabha, Opposition Members of Parliament (MPs) have raised concerns and sought clarification from the government regarding the allocation of funds collected under the National Security Cess. They questioned whether these funds are being shared with state governments or if they are entirely retained by the Centre.
This issue is important because cesses and surcharges are typically not part of the divisible pool of taxes that are shared with states, unlike other central taxes. This debate touches upon the principles of fiscal federalism, the financial autonomy of states, and the transparency in the utilization of public funds, especially those earmarked for specific purposes like national security.
पृष्ठभूमि
The Indian Constitution outlines a robust framework for fiscal federalism, distributing taxation powers and revenue-sharing mechanisms between the Union and State governments. The Finance Commission, constituted under Article 280, plays a crucial role in recommending the distribution of net proceeds of taxes between the Union and the States, and the allocation of shares among the States.
However, the use of cesses and surcharges by the Union government has become a contentious issue. These levies are typically not part of the 'divisible pool' of taxes, meaning their proceeds are not mandatorily shared with states, unlike other central taxes.
नवीनतम घटनाक्रम
बहुविकल्पीय प्रश्न (MCQ)
1. With reference to cesses and surcharges in India, consider the following statements: 1. Cesses are levied by the Union government for specific purposes and are generally not part of the divisible pool of taxes. 2. Surcharges are temporary levies imposed to meet urgent financial needs and are mandatorily shared with states as per Finance Commission recommendations. 3. The power to levy cesses and surcharges is derived from Article 271 of the Indian Constitution. Which of the statements given above is/are correct?
- A.1 only
- B.1 and 2 only
- C.1 and 3 only
- D.2 and 3 only
उत्तर देखें
सही उत्तर: A
Statement 1 is correct. Cesses are indeed levied for specific purposes and are typically excluded from the divisible pool, meaning their proceeds are not shared with states. Statement 2 is incorrect. Surcharges are also not part of the divisible pool and thus are not mandatorily shared with states. They are levied for specific periods or purposes, but their proceeds go entirely to the Centre. Statement 3 is incorrect. While Article 271 allows Parliament to increase any duties or taxes referred to in Articles 269 and 270 by a surcharge for the purposes of the Union, the power to levy cesses is generally derived from specific legislative enactments under various entries in the Union List (e.g., education cess under Entry 82, 83, 97 of Union List). Article 271 specifically mentions surcharges on certain duties and taxes, not all cesses.
2. In the context of fiscal federalism in India, which of the following statements best describes the 'divisible pool' of taxes?
- A.It refers to the total tax revenue collected by the Union government, including cesses and surcharges, that must be shared with states.
- B.It is the aggregate of all taxes collected by both the Union and State governments that are then redistributed based on population criteria.
- C.It comprises the net proceeds of certain Union taxes and duties that are mandatorily shared with states, as recommended by the Finance Commission.
- D.It represents the funds allocated by the Union government to states for specific centrally sponsored schemes, based on their performance.
उत्तर देखें
सही उत्तर: C
Option C is the most accurate description. The divisible pool refers to the net proceeds of certain Union taxes and duties (excluding cesses and surcharges, as per Article 270) that are constitutionally mandated to be shared with states. The proportion and criteria for this sharing are recommended by the Finance Commission. Option A is incorrect because cesses and surcharges are generally excluded from the divisible pool. Option B is incorrect as it includes state taxes and suggests redistribution based solely on population, which is not accurate. Option D describes tied grants for specific schemes, not the divisible pool of taxes.
3. Consider the following statements regarding the Finance Commission in India: 1. It is a quasi-judicial body constituted by the President of India every five years or earlier. 2. It makes recommendations on the distribution of net proceeds of taxes between the Union and the States, and between the States themselves. 3. Its recommendations are binding on the Union government but only advisory for the State governments. Which of the statements given above is/are correct?
- A.1 only
- B.1 and 2 only
- C.2 and 3 only
- D.1, 2 and 3
उत्तर देखें
सही उत्तर: B
Statement 1 is correct. The Finance Commission is indeed a quasi-judicial body constituted by the President every five years or earlier, as per Article 280. Statement 2 is correct. Its primary function is to recommend the distribution of net proceeds of taxes between the Union and the States (vertical devolution) and among the States (horizontal devolution). Statement 3 is incorrect. The recommendations of the Finance Commission are advisory in nature for the government (both Union and State) and are not legally binding. However, they are usually accepted by the Union government out of convention and to maintain fiscal harmony.