Indian Polity & Constitution

Centre-State Relations

By Examguru / 28 Sep, 2023 / Download PDF

Centre-State Relations

  • Centre-state relationship in India is looking towards federalism, which has been derived from the Constitution of Canada.
  • The Constitution of India, being federal in structure, divides all powers (legislative, executive and financial) between the centre and the states. However, there is no division of judicial power as the Constitution has established an integrated judicial system to enforce both the Central laws as well as State laws.
  • The constitution provides for a three-fold distribution of legislative subjects between the centre and the states, viz. List-I (the Union List), List-II (The State List) and List-Ill (The Concurrent List) in the 7th Schedule.

1. Union List:

The Parliament has exclusive powers to make laws with respect to any of the matters enumerated in the Union List. This list has at present 100 subjects (originally 97 subjects) like defense, banking, foreign affairs, currency, atomic energy, insurance, communication, inter-state trade and commerce, census, audit, postal services, rail, air and water transport, Broadcasting, foreign debt, foreign trade and so on.

2. State List:

The state legislature has "in normal circumstances" exclusive powers to make laws with respect to any of the matters enumerated in the State List. This has at present 61 subjects (originally 66 subjects) like public service, public order, Police, Public health and sanitation, Agriculture, irrigation, prisons, local government, fisheries, markets, theaters, gambling, land revenue and so on.

3. Concurrent List:

Both the Parliament and State Legislature can make laws with respect to any of the matters enumerated in the Concurrent List. This list has at present 52 subjects (originally 47 subjects) like national waterways, criminal law and procedure, civil procedure, marriage and divorce, population control and family planning, electricity, labour welfare, economic and social planning, drugs, newspapers, books and printing press, factories and others.

Note: The 42nd Amendment Act of l976 transferred 5 subjects to Concurrent List from State List –

(a) Education,

(b) Forests,

(c) Weights and measures,

(d) Protection of wild animals and birds and

(e) Administration of justice; constitution and organisation of all courts except the Supreme Court and the High Courts.

  • Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a state though that matter is one which is enumerated in the State List. This provision has reference to the Union Territories or the Acquired Territories (if any).
  • The 101st Amendment Act of 2016 has made a special provision with respect to Goods and Services Tax (GST). Accordingly the Parliament and the state legislature have power to make laws with respect to Goods and Services Tax imposed by the Union or by the State. Further the Parliament has exclusive power to make laws with respect to GST where the supply of goods or services or both takes place in the course of inter-state trade of commerce.

Residuary Subjects:

The power to make laws with respect to residuary subjects (i.e., The matters which are not enumerated in any of the three lists) is vested in the Parliament. This residuary power of legislation includes the power to levy residuary taxes.

Important Articles

Article

Details

247

Power of Parliament to provide for the establishment of certain additional courts

249

Power of Parliament to legislate with respect to a matter in the state list in the national interest

250

Power of Parliament to legislate with respect to any matter in the state list if a Proclamation of Emergency is in operation

252

Power of Parliament to legislate for two or more states by consent and adoption of such legislation by any other state

253 

Legislation for giving effect to international agreements

257

Control of the Union over states in certain cases

262

Adjudication of disputes relating to waters of inter-state rivers or river valleys

268

Duties levied by the Union but collected and appropriated by the states

268

A Service tax levied by Union and collected and appropriated by the Union and the states (Repealed)

269

Taxes levied and collected by the Union but assigned to the states

270

Taxes levied and distributed between the Union and the states

275

Grants from the Union to certain states

283

Custody of suitors' deposits and other moneys received by public servants and courts

286

Restrictions as to imposition of tax on the sale or purchase of goods

287

Exemption from taxes on electricity

289

Exemption of property and income of a state from Union taxation

290

Adjustment in respect of certain expenses and pensions

292

Borrowing by the Government of India

293

Borrowing by states

Parliamentary Legislation in the State Field

  • According to Article 249 if the Rajya Sabha declares that it is necessary in the national interest that Parliament should make laws with respect to a matter in the State List, then the Parliament becomes competent to make laws on that matter.
  • Such a resolution must be supported by two-thirds of the members present and voting.
  • The resolution remains in force for 1 year; it can be renewed any number of times but not exceeding one year at a time.
  • The laws cease to have effect on the expiration of six months after the resolution has ceased to be in force.
  • This provision does not restrict the power of a State Legislature to make laws on the same matter.
  • The Parliament acquires the power to legislate with respect to goods and services tax or matters in the State List, while a proclamation of national emergency or the President's rule is in operation. The laws become inoperative expiration of six months after the emergency has ceased to operate.
  • According to the provisions of Article 253 the Parliament can make laws on any matter in the State List for implementing the international treaties, agreements or conventions. This provision enables the Central Government to fulfill its international obligations and commitments.

Administrative Relations

  • Article 256-263 in Part XI of the Constitution deal with the administrative relations between the Centre and the States. Besides, there are various other articles pertaining to the same matter. Article 312 of the Constitution authorizes the Parliament to create new All-India Services on the basis of a Rajya Sabha resolution to that effect. Under Article 263 the President can establish an Inter-State Council to investigate and discuss subject of common interest between the Centre and the States.

Financial Relations

  • Article 268 to 293 in the Part XII of the Constitution deal with Centre-State financial relations. Besides these, there are other provisions dealing with the same subject.

Tax Revenue

Distribution of Tax Revenue

  • The 80thAmendment Act of 2000 and the 101stAmendment Act of 2016 have introduced major changes in the scheme of the distribution of tax revenues between the Centre and the States.
  • The 101st Amendment provided for subsuming of various central indirect taxes and levies such as Central Excise Duties, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty, commonly known as Countervailing Duty, Special Additional Duty of Customs and Central Surcharges and Cesses so far as they related to the supply of goods and services.
  • Similarly, the Amendment provided for subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the Tax levied by the local bodies), Central Cess Tax (Levied by the Centre) and Collected by the states, Octroi and Entry Tax, Purchase Tax, Luxury Tax, Taxes on Lottery, Betting and Gambling and State Surcharges and Cesses in so far as they related to the supply of goods and services.
  • Further, the amendment deleted Article 268-A as well as Entry 92-C in the Union List, both were dealing with service tax.

Distribution of Non-tax Revenue

  • Major Sources of the Centre: Posts and Telegraphs. Railways, Banking, Broadcasting, Coinage and Currency, Central Public Sector Enterprises, Escheat and Lapse and others.
  • Major Sources of the State: Irrigation, Forests, Fisheries, State Public Sector Enterprises, Escheat and Lapse and other.
  • To resolve the contentious issues between the Centre and the States mainly four commissions.
    1. Administrative reforms commission 1966 (Chairman -Moraraji Desai, followed by K. Hanumanthayya).
    2. Rajamannar Committee in 1969 (Chairman Dr. PV Rajamannar)
    3. Sarkaria Commission in 1983 (Chairman -Justice R. S. Sarkaria were constituted.
    4. Punchhi Commission in 2007 (Chairman - Justice Madan Mohan Punchhi)

Sarkaria Commission:

 In 1983, the Central government appointed a three-member Commission on Centre -state relations under the chairmanship of R.S. Sarkaria, a retired judge of the Supreme Court. The commission was asked to examine and review the working of existing arrangements between the Centre and states in all spheres and recommend appropriate changes and measures. It was initially given one year to complete its work, but its term was extended four times. It submitted it's report in 1988. The Commission made 247 recommendations to improve Centre-state relations. The Central Government has implemented 180 (out of 247) recommendations of the Sarkaria Commission. The most important is the establishment of the Inter-State Council in 1990.

Punchhi Commission:

  • The Second commission on Centre-State Relations was set-up by the Government of India in April 2007 under the Chairmanship of Madar Mohan Punchhi, former Chief Justice of India. Other four members of the five member commission were 1. Dhirendra Singh 2. Vinod Kumar 3.Prof. N.R. Madhav Mennon and 4. Dr. Amresh Bagchi. After the demise of Dr. Bagchi, Mr. Vijay Shankar was appointed as the new member of this commission. It was required to look into the issues of Centre-State relations keeping in view the sea-changes that have taken place in the polity and economy of India since the Sarkaria Commission had last looked at the issue of Centre-State relations over two decades ago. The Commission submitted its report to the government in April 2010. In finalising the 1,456 page report, in seven volumes, the Commission took extensive help from the Sarkaria Commission report, the National Commission to Review the Working of the Constitution (NCRWC) report and the Second Administrative Reforms Commission report. In all, the Commission made over 310 recommendations, touching upon several significant areas in the working of Centre-State relations.

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