Central state relationship

ThePoliticalClassroom July 01, 2025

 


INTRODUCTION

Indian federalism aims at promoting close cooperation between the Centre and the State(s).

All powers in India are divided into three categories: legislative, executive, and financial, shared between the central government and the states, creating an integrated system.

This division is evident in the State List, where some matters fall under exclusive state jurisdiction. Conversely, the Union List designates subjects for major decisions by the central government. There's also a Concurrent List, where the center and states have decision-making roles on specific matters.

Legislative Relations

  • Articles 245-255 discuss legislative relations between the Union (Parliament) and the states (state legislatures).
  • They define the scope of legislative powers, with Parliament having overriding authority.
  • Provisions address subjects for legislation, inconsistency between state and national laws, and residual powers.
  • Schedule VII categorizes Union List, State List, and Concurrent List.

There are four aspects of the legislative relationships between the Centre and the States which are as follows:

  • Territorial extent of Central and State legislation
  • Distribution of legislative subjects
  • Parliamentary legislation in the state field
  • Centre’s control over State legislation

Territorial Extent of Central and State Legislation

  • The ability to pass legislation that covers all or a portion of India’s territory belongs to the Parliament.
  • Laws can be passed by the State legislature that is applicable to the entire State or only a portion of it. Unless there is a sufficient connection between the State and the object, State laws are not applicable outside of the State.
  • The only body with the power to pass extraterritorial legislation is Parliament.

Distribution of Legislative Subjects

  • The Union List, State List, and Concurrent List are the three divisions established by the COI.
  • Parliament is the exclusive authority when it comes to the Union list.
  • In most cases, the State legislature alone has the power to pass legislation pertaining to the things on the State list.
  • The State and Central governments can both pass laws on the subjects mentioned in the Concurrent list.

Parliamentary Legislation in the State Field

  • When Rajya Sabha approves a resolution with the support of two-thirds of the members present and voting, it will provide Parliament with the authority to enact legislation on a state list issue that is best for the nation.
  • When a declaration of a National emergency is in force the Parliament may pass laws on any matter covered by the state list.
  • When the President’s Rule is imposed in a state, the Parliament becomes empowered to make laws with respect to any matter in the State List.
  • To implement International Agreements, the parliament can make laws on any matter in the state list for implementing International Treaties, agreements and conventions.

Centre’s Control Over State Legislation

  • Specific laws established by the State legislature may be set aside by the governor for presidential consideration. They are entirely under the President’s power.
  • Bills on specified subjects listed in the State list can only be filed in the State legislature with the President’s prior consent. For instance, interstate trade and commerce.
  • The President may ask a state to lay aside money bills and other financial bills for his consideration in the case of a financial emergency.

Administrative Relations

Articles 256 to 263, Part XI of the Constitution, deal with administrative relations between the Centre and the States.

  • Distribution of Executive Powers
  • The Obligation of States and the Centre
  • Matters where the Centre can Direct the State
  • Integrated Judicial System

Distribution of Executive Powers

  • The Centre’s power encompasses the entire nation when it comes to matters over which it has exclusive jurisdiction (union list), as well as when it exercises any rights, jurisdiction, or authority granted to it by a treaty or agreement.
  • The subjects listed in the State list fall under the State’s purview.
  • The States have the executive authority in matters involving the concurrent list.
  • The State’s executive branch must act in a way that ensures the laws established by Parliament are upheld.

The Obligation of States and the Centre

  • The COI has placed two restrictions on the executive power of the states in order to give ample scope to the centre for exercising its executive power in an unrestricted manner.
  • The State’s executive branch must act in a way that ensures the laws established by Parliament are upheld.
  • As not to prejudice the executive power of the Centre in the State.
  • In both cases, the executive power of the Centre extends to giving such directions to the state as are necessary for the purpose.
  • The sanction behind these directions of the Centre is coercive in nature.

Matters where the Centre can Direct the State

  • Construction and maintenance of communication systems deemed to be of national or military importance by the government.
  • Actions to be taken to guarantee the State’s railways are safe.
  • Provision of enough resources for students from linguistic minority groups to receive elementary school instruction in their home tongue.
  • The creation and execution of specific initiatives for the ST’s welfare in the various states.

Integrated Judicial System

  • Despite its dual polity, India has built an integrated judicial system.
  • This unified judicial system is in charge of enforcing both Central and State laws.

Financial Relations

Articles 268 to 293 contained in Part XII of the constitution deal with Centre-state financial relations.

  • Allocation of Taxing Power
  • The Constitutional Restriction on The State’s Taxation Power
  • Distribution of Tax Revenues
  • Distribution of Non-Tax Revenues
  • Grants-in-Aid to the states
  • Goods and Services Tax Council

Allocation of Taxing Power

  • Taxation of the subjects on the Union list is the sole responsibility of Parliament.
  • Taxation on the things included in the State list may only be done by the State legislature.
  • The items on the concurrent list are subject to taxation by both the State and the Union.
  • The residuary power to tax belongs to the Parliament.

Restriction Placed by the COI on Taxation Power of the State

  • A State legislature can impose taxes on profession, trades, callings and employments.
  • A State can impose taxes on the sale or purchase of goods (other than newspapers). But this power of state to impose sales tax is subjected to the following restrictions:
  • No tax can be imposed on the sale or purchase of things taking place:outside the states, in the course of import or export; or in the course of inter-state trade and commerce.
  • No tax can be imposed on the sale or purchase. A tax imposed on the sale or purchase of goods declared by Parliament to be of special importance in inter-state trade and commerce is subject to the restrictions and conditions specified by Parliament.
  • The State cannot impose a tax on the sale of electricity when it is consumed by the centre or sold to the centre, consumed in the construction, maintenance or operation of any railway by the centre or sold to the railway company for the same purpose.
  • The State can impose tax on the sale of water or electricity sold to an authority established by Parliament for regulating or developing an Inter-state river. However, such imposition can be undertaken through a law which has received the assent of the President.

Distribution of Tax Revenues

  • Article 268: Taxes levied by the Centre, but they are collected and used by the State. E.g. Stamp Duties.
  • Article 269: Taxes are levied and collected by the Centre but assigned to the States. E.g. Taxes on the sale or purchase of goods.
  • Article 270: Taxes are levied and collected by the Centre but distributed between the Centre and the States. This category includes all taxes except those mentioned above, surcharges and cess. E.g. Taxes on Income.

Distribution of Non-Tax Revenues

  • The receipts from the following form the major sources of non-tax revenues of the Centre:

·        

    • Posts and telegraphs
    • Railways
    • Banking
    • Broadcasting
    • Coinage and currency
    • Central public sector enterprise
    • Escheat and lapse
  • The receipts from the following form the major sources of non-tax revenues of the States:
    • Irrigation
    • Forests
    • Fisheries
    • State public sector enterprise and
    • Escheat and lapse

Grants-in-Aid to the States

The COI provides grants-in-aid to the State from the Central resources. Following are the two types of grants-in-aid:

  • Statutory Grants:
    • Article 275 of the COI empowers the Parliament to make grants to the States which are in need of financial assistance and not to every State.

·        

    • These sums can be different for different States. These sums are charged on the Consolidated Fund of India every year.

·        

    • These are given to the states based on the recommendation of the Finance Commission.

Discretionary Grants:

  • Article 282 of the COI empowers both the Centre and the States to make any grants for any public purpose, even if it is not within their legislative competence.
  • The Centre is under no obligation to give these grants and the matter lies within its discretion.

 

 

Goods and Services Tax Council

  • The smooth and efficient administration of the goods and services tax ( GST ) requires cooperation and coordination between the Centre and the States.
  • In order to facilitate this consultation process, the 101st Amendment Act of 2016 provided for the establishment of a Goods and Services Tax Council or the GST Council.

Distribution of Tax Revenues

  • Article 268: Taxes levied by the Centre, but they are collected and used by the State. E.g. Stamp Duties.
  • Article 269: Taxes are levied and collected by the Centre but assigned to the States. E.g. Taxes on the sale or purchase of goods.
  • Article 270: Taxes are levied and collected by the Centre but distributed between the Centre and the States. This category includes all taxes except those mentioned above, surcharges and cess. E.g. Taxes on Income.

 

Article 279 – A empowered the President to constitute a GST Council.

The Council is a joint forum of the Centre and the States. It is required to make recommendations to the Centre and the States on the following matters :

  • The taxes, cesses and surcharges levied by the Centre, the States and the local bodies would get merged into GST.
  • The goods and services that may be subjected to GST or exempted from GST.
  • The threshold limit of turnover below which goods and services may be exempted from GST.
  • The rates include floor rates with bands of GST.
  • Any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.

 

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