Constitution Section 270 — Taxes levied and distributed between the Union and the States
Part XII — FINANCE, PROPERTY, CONTRACTS AND SUITS — General
Constitutional
Summary
This section explains how certain taxes collected by the central government are shared with the state governments. It covers most taxes listed in the Union List, except for specific taxes like customs duties and certain interstate sales taxes, and also excludes surcharges and special-purpose cesses. A fixed percentage of the net proceeds from these taxes in a financial year is set aside and given to the states where those taxes are collected, with the distribution method and timing decided by the President. The President makes this decision based on the recommendations of the Finance Commission once it is formed, or by order before the Commission is set up.
Official Text
(1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in articles 268, 269 and 269A, respectively, surcharge on taxes and duties referred to in article 271 and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2).
(1A) The tax collected by the Union under clause (1) of article 246A shall also be distributed between the Union and the States in the manner provided in clause (2).
(1B) The tax levied and collected by the Union under clause (2) of article 246A and article 269A, which has been used for payment of the tax levied by the Union under clause (1) of article 246A, and the amount apportioned to the Union under clause (1) of article 269A, shall also be distributed between the Union and the States in the manner provided in clause (2).
(2) Such percentage, as may be prescribed, of the net proceeds of any such tax or duty in any financial year shall not form part of the Consolidated Fund of India, but shall be assigned to the States within which that tax or duty is leviable in that year, and shall be distributed among those States in such manner and from such time as may be prescribed in the manner provided in clause (3).
(3) In this article, "prescribed" means, —
(i) until a Finance Commission has been constituted, prescribed by the President by order, and
(ii) after a Finance Commission has been constituted, prescribed by the President by order after considering the recommendations of the Finance Commission.