Authored by Satyam Srivastava, a B.A.LLB. student at Chanakya National Law University, Patna.
Abstract
In this current situation, we always see quarrels between the union and the states because of political pressure and profits, and this causes tension for the whole country. This problem was seen by our constitution makers and they tried to solve it. They borrowed the idea of power distribution from different countries and they distributed various powers to the union and states that created a relationship between them. In this blog, I tried to mention every constitutional provision regarding the distribution of power. This blog is not only beneficial for law students, but anyone can read it and can understand this distribution of power very easily.
Introduction
The relation between Union and States is a very important topic in the constitution of India. Though the constitution of India came into existence on 26th January 1950 but this topic has a very strong and old history, we can find the traces of distribution of power in Government of India act, 1935.
In Indian constitution the relation between union and state has been defined under three heads namely-
1. Legislative Relation
2. Administrative Relation
3. Financial Relation
The legislative relation basically deals with law making power. Chapter IX deals with who will make the laws on any particular subject matter, the union or the state government. The Administrative relation deals with administrative power and financial relations deal with law making power related to the taxes.
Article 245 of the Indian constitution makes it clear that parliament can make the laws for whole or any part of the country and that law made by the parliament will also be applicable even outside the territory, that means that territorial limitation cannot hold back parliament from making laws for whole of the country. The same article also gives power to the states to make laws for their own territories but the law made by the states which has extra territorial operation will be invalid and that extra territorial operation can be sustained on the ground of territorial nexus[1].
Two elements for the territorial nexus were given by the court in the case of State of Bombay v. R.M.D. Chamarbaugwala[2],-
1. The connection must be real and not illusionary
2. The liability sought to be imposed must be pertinent to the connection.
The Relation Between Crime and State
There are few matters on which parliament and states can separately makes laws and on few they both have power to make laws. These subject matters have been defined in different lists (as Union list, State list and Concurrent list) which has been mentioned under Schedule 7 of Indian Constitution and Article 245 of the Indian Constitution. Parliament can also make the law on subject matters, including taxes, which has not been mentioned in State and Concurrent list and this power is known as Residuary power which has been mentioned under Article 248 of Indian Constitution. Residuary power has been given to Union in Indian constitution which shows that the supremacy has been given to center furthermore Union also has power to make laws subject matter related to state list in National interest[3].
As we discussed that the supremacy has been given to the Union, this can also be seen in the Article 254 of the constitution as it says that if any law made by the state gets in conflict with the law made by the Union, importance would be given to the law made by the Union, further Article 256 puts an obligation on the state to comply with the law made by the Centre and if it appears necessary, Centre can also give directions to the states. Sometimes disputes get arise between the states that cause tension between those states and Centre also plays an important role in solving the dispute.
Though the Supreme Court has jurisdiction to hear dispute, between the states, having legal character but sometime dispute having non-legal character may arise and in this matter President has power to establish an Inter-State council for solving the dispute between the states.[4] This council may have duty of ensuring, investigating subject of interest to one or more states, and making recommendations in particular for the better coordination.
The power to deal with the taxes by union and state has been mentioned Part XII of the Indian Constitution. It has been clearly mentioned under Article 265 that “No tax shall be levied or collected except by authority of law[5]. 'Law' in this mean statue law i.e., act of the legislature.[6] This is applicable only on the taxes and not on the fees. The difference between fee and tax is that fee works on quid pro quo principle i.e., fee is paid for getting any service in return but tax is a burden that must be paid even without getting any service.
In any federal system it becomes difficult to levy any collect the taxes this confusion somewhat has been solved by the Indian Constitution. As, Article 268 lays down that the stamp duties shall be levied by the Centre and collection shall be done by states in their own territory and by the Centre in the Union territories. The proceeds of any such duties shall be assigned to states and that proceed will not from the Consolidated fund of India.
A new article was added by the 101st Constitutional amendment act,2015 which deals with the levy and collection of good and services (GST) tax in course of inter- state trade or commerce.[7] Article 269A says that GST on supplies in the course of Inter- state trade or commerce shall be levied and collected by the Centre and the proceeds should be apportioned between union and states by the manner prescribed by the Parliament.
All the taxes other than tax mentioned under Article 268,269 and 269A shall be levied and collected by the union and proceeds shall be distributed between the union and states. However, Corporation tax is not liable to be shared with the states[8].
It has been mentioned under Article 280 0f the Indian constitution that for the recommendation, on the distribution of net proceeds of taxes between the union and state and any other matter referred to it by the President, a commission shall be constituted by the President. That commission is known as Finance commission. Members of this commission shall be appointed by the President; it must have five members (one chairman and four other members) and qualification of such members shall be determined by the parliament itself. The commission shall determine its procedure and shall have power in the performance of their functions as parliament may by law confer on them[9]. President shall put together all the recommendation made by the commission with an explanatory note and it should be laid before each house of parliament.
There are few exceptions where union and state cannot tax on each other. As, state cannot impose tax on the union properties[10] and it also cannot impose on the electricity used by the union in any particular state. Article 289 gives exemption to the states where union cannot impose tax on the property and income of the states. Here we can clearly identify a difference between Article 285 and Article 289 as in Article 285 union is exempted from the taxes only on the property but under Article 289 state are exempted from the taxation on properties and Income.
Conclusion
The relation between union and state is a very important aspect for any country because it plays very important role in development of that country. In federal system it becomes so difficult to distribute the power but this is not the case with India because our constitution maker made it easy for us by establishing a relation between union and state in our constitution. As, parliament has the power to make laws for the whole of the country and states can make law for their own territory. Supremacy has been given to the Centre as it is duty of the state to oblige with the union laws and union can make recommendations to the state when it deems fit. In matter of taxes proceeds shall be distributed among union and state but in various cases the taxes must be levied by the Centre. For the recommendations regarding the distribution of proceeds of taxes a different commission must be constituted by the President, named as Finance Commission.
References-
[1] Territorial nexus means that a state law is not invalid so long as there is a sufficient nexus or connection between the state and the subject matter of law.
[2] AIR 1957 SC 699: 1957 SCR 874
[3] Constitution of India 1950, art 249 and 250
[4] Constitution of India 1950, art 263
[5] Constitution of India 1950, art 265
[6] S. Gopalan v. State of Madras (1958) 2 MLJ 117
[7] Constitution of India 1950 art 298 A
[8] ITO v. T.S. Devinatha Nadar, AIR 1968 SC 623: (1968)2 SCR 33
[9] Constitution of India 1950, art 280
[10] Constitution of India 1950, art 285