HPAS/Allied Mains 2022 Answer Writing Challenge Day 06: Model Answer

Question: Write a short note on major changes in the Centre-state fiscal relation in recent years . (4 Marks, 60 words)

Answer: 

Article 268 to 293 in Part XII of the constitution deals centre-state fiscal relations. Fiscal relations between the union and state governments have undergone significant changes in recent years.:

• Abolition of the Planning Commission and creation of the NITI Aayog.
• Higher tax devolution to the states on the recommendations of 15th finance commission
• 101 Amendment Act 2016 introduced of Goods and Services Tax (GST) and provided for the establishment of the GST Council under Article 279A for deliberation and joint decision making.

Impact:

• Introduction of GST has reduced the taxation power of the states, making them more dependent on Centre for finance. For example: Delays in fund transfer like GST compensation, IGST etc.
• Higher tax devolution means the states receive a larger volume of untied funds relative to tied funds. This will enhance the states autonomy in deciding their expenditure priorities.