Centre – State Relations

The framers of the Indian constitution perceived the need for a strong central government in order to keep their disintegrating forces in cheque and safeguard the integrity of the country. This ask the past made the Indian federation a unique one among the federal structures of the world. it is characterised by a high degree of centralization. the Indian constitution can be both unitary as well as federal according to the requirements of time and circumstances. the constitution of India is federal in form but unitary in spirit. the centre-state relations in the Indian federation can be summed up as follows: 

Legislative relations: article 245 to 255, In part XI of the constitution, deal with the legislative relations between the centre and the states. 

Distribution of legislative subjects: the constitution divides legislative authority between the union and the stage into three lists – 

• Union list 
• State list 
• Concurrent list 

The distribution is remarkably elaborate and detailed. the union list consists of 100. Each though vast extent as well as the great importance of the powers vested in the union government. The union parliament has exclusive authority to frame loss on subjects enumerated in the list. These include foreign affairs, defence, armed forces, communications, posts and telegraphs, foreign trade, Interstate trade, commerce etc. a number of items included in the list have an important bearing on billion state relations and some of them can enable the union to expand its area of operation I did with extend its control over this fear which falls under state jurisdiction. for example, item number 52 which refers to industry places a powerful lever in the hands of the union to take any industry under its own control. 

Both parliament and the state legislatures can make laws on subjects given in the concurrent list, but the centre has a prior and superior claim to legislate on concurrent subjects. the list comprises of 52 items including criminal and Civil Procedure, marriage and divorce, economic and special planning, trade unions, labour welfare, electricity, newspapers, books and printing presses, population control and family planning etc. the state list consisting of 61 items contains subject on which ordinarily the state alone can make laws. These include public order, police, administration of justice, prisons, local government, agriculture etc. However, what makes the state autonomy less real than it appears at first, is the fact that under certain conditions still constitution authorises the union government to extend its jurisdiction over matters formerly included in this state list. in fact, when ur proclaimation of emergency is in operation, parliament can legislate on matters and emulated in all the three lists. under article 356, relating to the breakdown of constitutional machinery in the state, parliament can takeover the legislative authority of the state. article 249 empowers Sir Roger to transfer any matter in the state list to the legislative jurisdiction of parliament by a resolution passed by a 2/3 majority. according to article 252, if the legislatures of two or more states passed resolution to the effect that it is desirable to have a low passed by parliament on any matter in the state list, parliament can make laws regulating the matter. any other state may also adopt such a law by passing a resolution to that effect. such last can be amended or repealed only by the parliament. article 253 in powers parliament to make laws for the whole or any part of the territory of India for implementing international agreements and conventions to which India is a party, even if the subjects covered by such treaties and agreements fall within the state list. 

Finally, the residuary powers have been placed under the legislative jurisdiction of the parliament. This is a departure from the normal pattern of federalism. in the USA, Switzerland and Australia, the residuary powers vested in the component units. the Indian constitution makers prefered to follow the example of Canada in the assignment of the residuary powers.  

Article 246A: this is a new article inserted in the constitution related to the goods and services tax. it says that-  

1. Notwithstanding anything contained in articles 246 and 254, parliament, and subject to clause (2), the legislature of every state, have the power to make laws with respect to boots and services tax imposed by the union or by such state. 
2. Exclusive power to weight loss with respect to boots and services tax the supply of goods, or of services, or both takes place in the course of Inter-state trade or commerce. 

Both union and states in India now have “concurrent powers” to make law with respect to goods & services. The intra – state trade now comes under the jurisdiction of both centre and state; while inter-state trade and commerce is “exclusively” under the central government jurisdiction. 

Central control over state legislation: 

In addition to the parliament’s power to legislate directly on the state subjects as mentioned above, the constitution also provides for the centres consent before a bill passed by the state legislature can become a law. A state law providing for compulsory acquisition of their property shall have no effect unless it has received the consent of the president. article 31-A Brandt immunity to last providing for agrarian reforms from articles 14 and 19. the immunity of article 31-A will not be available to a state law unless it has received the consent of the president. the object of please provisions is to ensure uniformity in laws providing for agrarian reforms. Articles 200 directs the governor of escaped to reserve a bill passed by a state legislature for the consideration of the president if in his opinion if passed into law, would derogate the powers of the High Court. article 288(2) authorizes a state to tax in  respect of water or electricity stored, Generated, consumed, distributed or sold by any authority established by law made by parliament. but no such law shall be valid unless it has been recent for the consideration of the president and has received his assent. articol 304(b) what did I just a state legislator to impose reasonable restrictions on the freedom of trade, commerce and interpose within the state in the public interest. but such laws cannot be introduced in the state legislature without the previous sanction of the president. in short, the states do not possess exclusive or inviolable legislative jurisdiction even in matters formally recognised by the constitution as falling within the sphere of state autonomy. in the United States of America, federal legislation or any subject which falls within this sphere reserved to the states is impossible without a constitutional amendment. in the context of legislative relations between the centre and the states, the Supreme Court of India has propounded the doctrine of pith and substance and doctrine of colourable legislation which is to be kept in mind. 

Doctrine of pith and substance: 

Under the constitution of India, there is a division of legislative spheres between the union and the states. within their respective areas of authority, the union enter state legislatures are supreme and they are not supposed to encroach upon the sphere reserved for the other. if a law passed by one and gorgeous upon the held assigned to the other, the court will apply the doctrine of pith and substance. If it is found that the law in substances within the subjects assigned to that legislature and the intention of the law is genuine, the law shall be valid in its entirety, even though there is some overlapping. the justification given for this is that since there cannot be a water- tight division of powers between the centre and the states, a stripped verbal interpretation of any provision would result in invalidation of many laws on the simple ground of overlapping. the Supreme Court propounded this doctrine in the case of state of Rajasthan vs. G. Chawla in 1959. In the opinion of the court, such encroachment is only incidental and hence the extent of invasion is immaterial. 

Doctrine of colourable legislation: 

it is very much applicable under a federal constitution. in a federal government, The transgression of its limits of power by a legislature maybe either overt and direct or covert and indirect. When the legislation is indirect and covert, it is called colorable legislation. in this case, although the subject on which the legislature makes loss falls within its legislative competence in exterior appearance It’s the real motive is to transgress the power of, other legislature covertly. in this case, applying the doctrine of colorable legislation, the court can invalidate the entire law. the essence of this doctrine is that what the legislature cannot do directly, it cannot do the same indirectly also. 

States challenging union laws (The CAA, NRC and NPR) under Article 131 

• Telangana Assembly has become the seventh State Legislature to pass resolution against the CAA, NPR and NRC after West Bengal, Kerala, Rajasthan, Punjab, Delhi and Bihar. 
• They have said that they will not let the law passed by the Parliament of India be implemented in the respective states. Furthermore, the state of Kerala has also filed a suit in the Supreme Court under Article 131 of the Constitution of India. 

Challenge by the States under Article 131 

• Article 131 of the Consititution of India deals with the original jurisdiction of the Supreme Court of India to deal with disputes between the Government of India and one or more States.  
• Article 131 has two requirements, the first being that the dispute has to be between the Government of India and one or more states and the second that the dispute involves any question (whether of law or fact) on which the existence or extent of a legal right depends . 
• In State of Bihar vs. Union of India (1969), the Supreme Court has held that the dispute cannot involve the idea of a private citizen, a firm or a corporation figuring as a disputant either alone or even along with a state or with the Government of India. In the same case it has also been held that the dispute should not be of a political character but only involving a legal right. 

Can Centre invoke Articles 365, 355 & 356 of the Constitution 

• As far as the Citizenship Amendment Act is concerned, the Union can conduct that exercise on its own from Delhi because it’s related to grant of citizenship. It could ask people to send in their application and then decide on the citizenship. It could ask people to send in their application and then decide on the citizenship under the provisions of the Citizenship Act. However, as far as exercises such as the NRC and NPR are concerned, it will be difficult to go ahead without the cooperation of the state governments. 
• In the light of above, a debate has arisen if the Centre can force this law on the State? 
• The Seventh Schedule of the Constitution divides the subjects on which the Centre ans states can make laws under the Union, State and Concurrent lists. The subject of citizenship, naturalisation and aliens (foreigners) finds mention exclusively in the Union List which contains a total of 97 subjects. 
• Article 365 provides that where any state government fails to comply with the directives of the Union then the President could hold that a situation has arisen in which the government of the State cannot be carried on in accordance with the provision of this Constitution. 
• Similar is the case with the State Assemblies, passing resolution to not implement the CAA, NRC and the NPR. And thus, in that scenario Centre can use the provisions of Article 356, in conjunction with Article 365 to impose State emergency citing that the government of the State cannot be carried on in accordance with the provisions of this Constitution. 

Final Words 

• The issue of citizenship clearly falls within the domain of the Union government and the State governments challenging the law before the Supreme Court under the guise of a “dispute” can wreck a havoc on the unique federal system as it would leave an extremely dangerous precedent wherein any state government could challenge a law in the Union List and create a constitutional breakdown leading to a paralysis in governance. 
• The founding fathers of the Constitution had thought of a mechanism to represent the aspirations of States through the Rajya Sabha which is the Council of States. The states who are resenting the Union Law had the forum of the Rajya Sabha to not let the bill become a law through their MPs voting against it. But opposing it through suits will hamper the federal fabric of the country. 

Administrative Relations 

Articles 256 to 263, in Part XI of the Constitution, deal with the administrative relations between the centre and the states. The administrative relations between the Union and the States offer yet another proof of the highly integrated nature of the Indian federation. Under the Constitution, the Union Government can exercise the executive power in respect of all matters within its legislative jurisdiction. Some of these matters, such as customs and central excise, income tax, railways, post and telegraphs, are administered directly by services maintained by the Union Government. In most of the cases, the administration of Union matters is delegated to State authorities. In this respect, there is a striking contrast between the American and the Indian federal systems. In the United States, the administrative systems of the Union and the States run parallel. In India they meet at many points. The Union – State administrative relations in India are organized so as to enable the Union Government to exercise considerable direction and control over the administrative machinery of the States. The Constitution places upon the States the obligation to exercise their executive authority in such a way as to ensure compliance with the Union laws. It also envisages that the executive power of the State shall be so exercised as not to impede or prejudice the exercise of the executive power of the Union. The Union Government has been armed with the power of giving such directions to States as may appear to be necessary for the purpose. The Union Government can apply drastic sanctions against the State which fails to carry out its directions. Acting on the powers under Article 356, the President may proclaim a breakdown of constitutional machinery in a State and proceed to take into his hands all the powers of the Governor or any other State officer. In such an eventuality, the federal basis of Indian polity is suspended in respect of the State concerned. The Union Government has also been given certain powers to promote Inter-State co-operation and to settle Inter-State river water disputes. For this purpose, the President may appoint an inter-state council to effect coordination between states. The function of the Inter-State council is advisory in nature. 

Financial Relation: 

Articles 268 to 293, in Part XII of the Constitution, deal with the Centre-state financial relations. Besides these, there are certain other provisions dealing with the same subject. The issue of financial relations has its own significance in a federation, in view of the fact that the distribution of powers necessitates the simultaneous distibution of resources for the adequate and efficient performance of the functions assigned to each government. The principle of political autonomy for the units of federation requires that there must be fiscal autonomy as well so that the relationship between the union and the state governments remains one of co-ordination and co-operation. However, the Indian Constitution provides for a financially strong Centre so much so that the States are almost completely dependent upon the Union for financial assistance. The outstanding feature of the Centre-state financial relation is that most of the major resources accrue to the Union and out of those revenues, some are transferred to the states. 

Scheme of distribution of revenue 

Article 268 provides the scheme of the distribution of revenue between the union and the states. The states possess exclusive jurisdiction over taxes enumerated in the state list. The union is entitled to the proceeds of the taxes in the union list. The concurrent list includes no taxes. However, while the proceeds of taxes within the state list are entirely retained by the states, proceeds of some of the taxes in the union list are allotted, wholly or partially, to the states. The constitution mentions four categories of union taxes which are wholly or partially assigned to the states: 

• Duties levied by the Union but collected and appropriated by the states: according the article 268, stamp duties and duties of excise on medicinal and toilet preparations mentioned in the union list are levied by the central government. These duties are collected by the states within which such duties are leviable. The proceeds of such duties are assigned to the states. 
• Taxes levied and collected by the union but assigned to the states: according to article 269(1), duties in respect of succession to property other than agricultural land (2) estate duty in respect of property other than agricultural land, (3) terminal taxes on goods or passengers carried by railways, sea or air, (4) taxes on railway fares and freights etc. 
• Article 269A: According to this new article goods and services tax on supplies in the course of inter-state trade or commerce shall be levied and collected by the government of India and such tax shall be apportioned between the union and the states in the manner as may be provided by Parliament by law on the recommendations of the goods and services tax council. The article also makes it clear that the proceeds such collected will not be credited to the consolidated fund of India or state but respective share shall be assigned to that state or centre. The reason for the same is that under GST, where the centre collects the tax, it assigns the state’s share to state, while where the state collects the tax, it assigns centre’s shared to centre. if that proceed is deposited in consolidated fund of India or state, then, every time there will be a need to pass an appropriation tax. Thus, under GST, the apportionment of the tax revenue will take place outside the consolidated funds. 
• Taxes levied and collected by the union and distributed between the union and states: according to article 270, income tax (not including corporation tax) is levied and collected by the union and is distributed between the union and the states. after deducting some attributable to the union territories and to the union emoluments, a prescribed percentage of the taxes is distributed among states in such manner as may be prescribed by law. 
• Taxes levied and collected by the union and may be distributed between the union and the states: Duties other than those all medicinal and toilet preparations as are mentioned in the union list are levied and collected by the union and whose net proceeds may be shared between the union and the states. 

Grants in aid and loans: 

Apart from, these patterned distribution of proceeds of taxes or revenues, the constitution also makes provision for grants in aid to the states out of to revenues of the union and to provide loans (article 275) to them with the prime objective of promoting the welfare of the scheduled tribes and raising the level of administration to the scheduled areas. Though the union and the states argued empowered to make grants as per the constitution but by virtue of larger resources, the union’s power is greater than that of the states. The State government cannot run without the grants in aid by the union. 

The constitution provides for three kinds of such grants: 

1. First, parliament is empowered to make such grants, as it may deem necessary to give financial assistance to any state which is in need of such help to overcome the budgetary deficits. 
2. It may be a specific budget grant, as in the case of Jude producing states like Assam, Bihar, Odisha and West Bengal, in lieu of a share of Jute export duty. The sums of such grants shall be determined by the president and be paid to the states as long as the export duty on Jute and Jute products continued to be levied by the Government of India. 
3. The union can make grants for any public purposes even if it is not within its legislative competence and by virtue of this provision that many of the larger capital grants are made for national development schemes. 

Besides these grants in aid, the union government has been giving other grants also to the states from time to time. these grants are generally unconditional, but in certain cases, as in Assam, grants have been made for the development of scheduled areas and tribes. 

Loans: apart from dependence on grants in aid given by the centre, the state also depend greatly on the union for getting loads. the union government is empowered to borrow money on the security of the consolidated fund of India, subject to limitation laid down by the parliament. a state government can borrow only within India and cannot raise a new loan without the consent of the union government if there is an outstanding of any part of the previous loan granted by the union or owed to it. Although the constitution has made an effort to allocate every possible source of revenue either to the union or the states, this allocation is quite broad – based. it needs specialised agencies devoted to the task. following institutions play a significant role in this distribution of revenue between centre and states: 

1. The constitution provides for the appointment of a finance Commission by the president, every five years or earlier, to advise him regarding the distribution of resources between the union and the States and other related revenue matters. 
2. The Comptroller and Auditor General (CAG) is appointed by the president and parliament may interest him duties and such powers in relation to the accounts of the states as it may deem proper. the CG also determines the manner in which the accounts of the states shall be maintained and he audits that accounts as well. 

During a financial emergency, the control of the union government over the finances of the states is further tightened. the union government acquires the right to direct the states to observe such cannons of financial propriety and other safeguards as may be specified, To reduce the salaries and allowances of all persons serving in the state including the High Court judges and reserve all the money bills for their consideration of the president. thus it is apparent from the above write ups that the states of the Indian union does not possess adequate financial resources and they are bound to look to the union government for assistance all the time. the increased reliance on the union government has led to the erosion of their autonomy to a great deal and thereby creating a conflicting situation for these assistants of the federal structure itself. Hence, in view of the weak financial endowments of the states, still has been a consistent and growing demand for allocation of more and more financial resources to the states so that they could tackle the social and economic backwardness and be able to contribute to the comprehensive development of the states. 

Article 279A: it provides for the constitution of the GST council by the president within 60 days from this act coming into force. the GST council shall consist of the following members: 

• The union finance minister – chairperson; 
• the union minister of state in charge of revenue or finance minister. 
• the minister in charge of finance or taxation or any other minister nominated by each state government members. 

The GST council shall make recommendations to the union and the states on: 

1. the taxes, cesses and surcharges levied by the union, the States and the local bodies which may be subsumed in the GST; 
2. the goods and services that may be subjected to, or exempted from the goods and services tax; 
3. model goods and services tax laws, Principles of levy, apportionment of goods and services tax levied on supplies in the course of Interstate trade or commerce under article 269A and the principles that govern the place of supply; 
4. the threshold limit of turnover below which goods and services may be exempted from goods and services tax; 
5. The rates including flow rates with bands of goods and services tax; 
6. any special rate or rates for a specified period, to raised additional resources during any natural calamity or disaster; 
7. special supervision with respect to states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and 
8. Any other matter relating to the goods and services tax, as the Council may decide. 

GST- ushered in a new era of cooperative federalism 

With the introduction of GST by the 101st constitutional amendment act the centre got its exclusive power to tax manufacture of goods and services and the states gave up their exclusive power to tax sale of goods (sales tax/ VAT). Both the centre and the states agreed to share their power to achieve uniformity and remove compartmentalization in indirect taxation. 

the RBI stated that GST is set to usher in a new era of cooperative federalism. It is true for several reasons: 

• 25 states out of 29 states, have suffered fiscal slippage in the year 2016-17 and GST remains the best bet for state governments in returning to the path of fiscal consolidation without compression of productive expenditure. the successful implementation of GST would help boost revenue through easier tax administration, supported by user friendly IT systems. 
• the greater devolution of resources through statutory transfers would provide states with the flexibility to prioritise their expenditure In Sync with their development objectives. 
• the GST is a fundamental reordering of federal fiscal relations of India – while states have had to give up their taxation powers and cope with associated insecurities, the union government has had to sacrifice its own share and its purview of revenues. 
• the GST council is structured such that things can’t go forward without a consensus or at least a majority of the votes carrying the resolution. This is because the states together account for 2/3 of the votes and the centre holds only a third; given this structure, the consensus would be the preferred option instead of demanding a vote. 
• GSP shows the strength and resolve of the federal structure as it provides for all the state chief ministers to come on one platform for GST, keeping aside their ideological and political differences. this reform had been pending for 16 years. 

Conceived on the principle of 1 nation one tax one market it is a tribute to the maturity and wisdom of Indian democracy. the GST council was a unique experiment under the Indian constitution because of the shared sovereignty and so far, the decisions have been taken by near consensus, which goes on to show that it has indeed ushered in a new era of cooperative federalism. 

Andhra Pradesh’s demand for special category status: 

The union government has declined the Andhra Pradesh legislators demand for special category status for the state. following this, the Telugu desam party has quit the Bhartiya Janta Party- led National Democratic alliance. in this context it is important to know about the SCS. 

What is special category status? 

Special Category Status used to be granted to some regions that have historically been at a disadvantage compared with the rest of the country. this decision was taken by the national development council, a body of the formal Planning Commission, and was based on various parameters such as: 

1. hilly and difficult terrain 
2. low population density 
3. low resource base 
4. strategic location along the external borders of the country 
5. economic and infrastructure backwardness 
6. non viable nature of the states finances 
7. a sizable share of tribal population 

Jammu and Kashmir was the first state to get special category status, and another 10 states were added over the years, with Uttarakhand being the last in 2010. 

What benefits does a state get under SCS? 

the benefits that a state that under the provision of being a special state are-  

• Preferential treatment in betting central funds assistance. 
• Concession on excise duty to attract industries to the state. 
• a significant 30% of the centre’s gross budget goes to the special category states. 
• these states can avail the benefit of debt swapping and debt relief schemes. 
• in the case of centrally sponsored schemes and external aid, special category states get it in the ratio of 90% grants and 10% loans, while other states get 30% of their funds as grants. 

Why was Andhra Pradesh asking that it be included in this list? 

• When Andhra Pradesh was bifurcated in 2014, it sought special category status on the grounds that it was at a disadvantage, especially because of the loss of capital Hyderabad to Telangana. the then Prime Minister, Manmohan Singh, had told the Rajya Sabha that special category status would be extended to under Pradesh for five years, to help put the state on a firmer footing. but the 14th finance Commission changed this. 
• the 14th finance Commission did away with the distinction between general and special category states since it had taken into account the level of backwardness of states in the proposed transfer of funds to state. 
• the idea was that adequate resources would be allocated through tax devolution and grants to address Interstate inequalities. 
• the special category status was therefore restricted to the three hill states – Jammu and Kashmir, Himachal Pradesh and Uttarakhand and those in the North East. 
• It was also decided that a revenue deficit grant would be provided for certain states for which devolution alone would be insufficient. Andhra Pradesh was one of the states that were to be given a revenue deficit grant.