SSC Selection Post 2025 PYQ — Question 8

Correct Answer

The Union Government collects taxes and distributes them between the Union and the States through the Finance Commission.

Explanation

Under the Indian Constitution, there is a clear division of financial powers between the Centre and the States. The Union Government collects certain taxes and shares the net proceeds between the Union and the States based on the recommendations of the Finance Commission. This arrangement is designed to ensure that States have sufficient financial resources to meet their developmental requirements.

Key Points

Article 280 of the Constitution provides for the establishment of the Finance Commission, which acts as an independent constitutional body to oversee the sharing of taxes. Important subjects like defense, currency, and foreign trade fall under the Union List, while States have the authority to levy taxes on subjects listed under the State List in the Seventh Schedule.

Important Questions and Answers

Question: Who constitutes the Finance Commission?

Answer: The Finance Commission is constituted by the President of India every five years or earlier as needed.

Question: Can States levy their own taxes?

Answer: Yes, States have the full authority to levy taxes on subjects listed under the 'State List' of the Seventh Schedule of the Constitution.