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Abstract
The imposition and collection of any tax is a legislative function which is assigned to parliament and state legislature in art 246 read with the relevant entries in list 1and 2 .Major taxes such as income tax excise duty, corporate tax, wealth tax, estate duty, service tax, and any residuary tax are assigned exclusively to parliament while taxes such as land service tax on agricultural income ,estate duty on agricultural land, excise duty on alcoholic and intoxicating drugs ,tax on entry of goods ,sales tax, passenger tax, goods and vehicle tax are assigned to the states as the revenue from the state taxes is expected to be inadequate to discharge their constitutional obligations .Part xii makes provision for the distribution of revenue from the taxes between the union and the states. Both the union and the states are required to maintain consolidated and contingency funds for receiving and depositing any revenue from any source (art 266-267) for the distribution of revenues between the union and the states some taxes are levied by the parliament but collected and appropriated by the states (art 268).Service tax is levied and collected by the union but appropriated by both the union and states(art268A).Some taxes are levied and by the union and are distributed between the union and states (art269). The union is also required to make some grants to the states (art 273-275).Provisions are also made for the union and states to borrow money (art 292,293).The other provision for the finance commission, which The President appoints at the end of every five years for recommending distribution of revenues between the union and the states, principles for grants –in-aid, measures for augmenting the consolidated fund of the states for supplementing the resources of panchayats and any other matter referred to it. The recommendations of the commission are placed before parliament and are invariably implemented .Thus the commission performs and important role in establishing the balance between the responsibilities of the governments and the revenues available for discharging them, something that is often a contentious and delicate matter in federal constitutions.