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Q61 (CDS-I/2024) Economy › Government Finance & Budget › Taxation powers distribution Answer Verified

Which of the following components of Central Government taxes on petroleum products is/are not shareable with the States?

Result
Your answer: —  Â·  Correct: D
Explanation

Under Article 270 of the Constitution, the 'Divisible Pool' of tax resources shared between the Union and States excludes specific items such as cesses and surcharges [3]. In the context of petroleum products, the Central Government levies several components: Basic Excise Duty (BED), Special Additional Excise Duty (SAED), Road and Infrastructure Cess (RIC), and Agriculture Infrastructure and Development Cess (AIDC) [2]. While Basic Excise Duty is shareable with the States as part of the divisible pool, cesses and surcharges are not [1]. Specifically, the Road and Infrastructure Cess and the Special Additional Excise Duty (which functions as a surcharge) are retained entirely by the Centre. Consequently, components like SAED and RIC are not shareable, whereas BED is distributed based on Finance Commission recommendations [3]. Therefore, options 2 and 3 (SAED and RIC) are the non-shareable components.

Sources

  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 182
  2. [3] Indian Polity, M. Laxmikanth(7th ed.) > Chapter 15: Centre-State Relations > B. Taxes Levied and Collected by the Centre but Assigned to the States (Article 269): The following taxes fall under this category: > p. 154
  3. [2] https://ppac.gov.in/prices/central-excise-and-customs-rate-on-major-petroleum-products
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