Abstract
The Indian central government’s policies on tax devolution to states play a crucial role in fiscal federalism and the distribution of financial resources among different tiers of government. Tax devolution means to the allocation of tax revenue collected by the union government to state government as per the provisions of the Constitution.
The principles and mechanisms of tax devolution in India have evolved over time, with significant reforms introduced to enhance fiscal autonomy and address regional disparities. Articles 268 provide the framework for tax devolution. Article 268 deals with taxes levied and collected by the Union but assigned to the states, while Articles 269 and 270 outline the distribution of specific taxes between the center and states.
Tax devolution enhances state governments’ fiscal autonomy by providing them with a stable and predictable source of revenue. It enables states to finance their expenditure priorities and undertake development programs according to local needs.
The study aims to assess the fiscal sustainability of tax devolution policies by examining their implications for central and state government finances. This involves analyzing the impact of tax devolution on fiscal deficits, debt levels, and overall fiscal health, and identifying measures to ensure long-term fiscal stability.
The study aimed to examine how tax devolution policies influence regional development outcomes by analyzing their impact on infrastructure investment, social welfare spending, and economic growth across different states. This involves assessing the effectiveness of tax devolution in promoting balanced regional development and addressing disparities in socio-economic indicators.
Keywords: Tax Devolution, Centre Government, State Government
