economics medium Fill in the Blank

The proceeds collected from a 'Cess' (like the Education Cess or Health and Education Cess) are strictly earmarked for a specific purpose and, unlike standard taxes, are ___ shared with the State Governments.

  1. balance (or sum to zero)
  2. trust (or confidence / faith)
  3. construction (or real estate / infrastructure)
  4. not (or never)

Answer: not (or never)

Article 270 of the Constitution mandates that the net proceeds of most taxes collected by the Centre must be shared with the States based on the Finance Commission's recommendations. However, Cesses and Surcharges (under Article 271) are explicit exceptions. The Centre retains 100% of the revenue generated from Cesses and Surcharges, which has recently become a point of friction as the Centre increasingly relies on them, shrinking the divisible pool available to States.

Topic Public Finance - Taxation
Exam Relevance UPSC Prelims, SSC CGL
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