Which of the following components of Central Government taxes on petroleum products is/are not shareable with the States? 1. Basic Excise Duty 2. Additional Excise Duty 3. Special Additional Excise Duty Select the correct answer using the code given below.
- (a)1 and 2 only
- (b)1, 2 and 3
- (c)3 only
- (d)2 and 3 only
Correct — D, 2 and 3 only. The Centre's excise levy on petrol and diesel is not one duty but a stack of four — Basic Excise Duty, Special Additional Excise Duty, the Additional Excise Duty that is charged as the Road and Infrastructure Cess, and the Agriculture Infrastructure and Development Cess. Only the first of these enters the divisible pool that the Finance Commission shares with the States. The reason lies in the text of the Constitution. Article 270 provides that all Union List taxes and duties are to be levied by the Centre and distributed with the States, but it expressly leaves out surcharges under Article 271 and any cess levied for specific purposes by a law of Parliament; and Article 271 adds that the whole proceeds of such a surcharge form part of the Consolidated Fund of India. The additional and special additional levies on fuel are of exactly that kind, so the Centre keeps every rupee of them, while the basic duty is shared. Hence items 2 and 3 are the non-shareable ones and item 1 is not.
- (a)1 and 2 only — Marks the basic duty as non-shareable and lets the special additional duty off. It is the other way round — the Basic Excise Duty is the one component that does go into the divisible pool.
- (b)1, 2 and 3 — Would mean the States get nothing at all from fuel excise, which is not the position. A share of the Basic Excise Duty is devolved along with the rest of the divisible pool.
- (c)3 only — Leaves out the Additional Excise Duty. That levy is charged as the Road and Infrastructure Cess, and a cess for a specific purpose is excluded from the divisible pool by Article 270 itself.
Central taxes are pooled and shared under Article 270, and the share is fixed on the Finance Commission's recommendation — the Fourteenth Commission raised the States' share to 42 per cent and the Fifteenth set it at 41 per cent after the reorganisation of Jammu and Kashmir. Two categories sit outside that pool by design: surcharges levied under Article 271, whose whole proceeds go to the Consolidated Fund of India, and cesses earmarked for a specific purpose. Because petrol and diesel are outside GST, the Centre still taxes them by excise, and it has built most of that levy out of these two non-shareable categories.
This is a federalism question wearing an oil-tax costume, and it is best answered from the Constitution rather than from any particular year's rate table. Whenever a levy is called a cess or a surcharge, ask whether it is shareable and the answer is no. That single rule also explains why States have complained that the divisible pool grows more slowly than the Centre's gross tax collection: shifting a rupee from basic duty to cess costs the Centre nothing but reduces what has to be devolved. The specific rates on fuel have been cut and raised several times, most visibly in November 2021 and May 2022, and the cuts were made in the non-shareable components so that the States' share was not affected — which is the clearest possible illustration of the distinction this question tests. Rates change often, so anchor the answer to the structure, not to a figure.
- Central excise on petrol and diesel comprises Basic Excise Duty, Special Additional Excise Duty, the Road and Infrastructure Cess levied as an Additional Excise Duty, and the Agriculture Infrastructure and Development Cess.
- Only the Basic Excise Duty forms part of the divisible pool shared with the States.
- Article 270 excludes surcharges under Article 271 and any cess levied for specific purposes from the taxes to be distributed.
- Article 271 provides that the whole proceeds of such a surcharge form part of the Consolidated Fund of India.
- Petroleum products remain outside GST in practice, which is why a separate Union excise on them still exists.
Two of the three items named in the question are outside the divisible pool, which gives option (d).
- Assuming that anything called an excise duty is automatically shareable — the label 'additional' or 'special' usually signals a cess or surcharge.
- Believing States get no share of fuel taxation at all; the basic duty is shared, and States levy their own VAT on top.
- Answering from a rate table instead of from Article 270, which is what actually decides the question.
Asked as a statement-code item on fiscal federalism, where the discrimination is between a plain duty and the earmarked levies stacked on top of it.
With reference to the Fourteenth Finance Commission, which of the following statements is/are correct? 1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent. 2. It has made recommendations concerning sector-specific grants. Select the correct answer using the code given below.
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer(a) 1 only
The other half of the same arithmetic. That item is about how large the States' share of the divisible pool is; this one is about what goes into the pool in the first place. A bigger percentage of a pool that excludes cesses and surcharges is worth less than it looks, which is the standing complaint of the States.
CDS_GK_2023_II_Q332023Which one of the following taxes is not subsumed under the Goods and Services Tax in India?
- (a) Customs Duties
- (b) Central Excise Duties
- (c) Service Tax
- (d) Taxes on Petroleum and Petroleum Products
Answer(d) Taxes on Petroleum and Petroleum Products
Explains why this question can exist at all. Because petroleum is still taxed outside GST, the Centre continues to levy excise on it, and that excise can be built out of shareable and non-shareable components in the way this item describes.
- practice — not a real PYQ
Which one of the following is NOT included in the divisible pool of central taxes shared with the States?
- (a)Corporation tax
- (b)Personal income tax
- (c)Cesses and surcharges
- (d)Basic excise duty
Answer(c) Cesses and surcharges — Article 270 expressly excludes them, and Article 271 sends the whole proceeds of a surcharge to the Consolidated Fund of India.
- practice — not a real PYQ
The share of the States in the net proceeds of central taxes is decided on the recommendation of
- (a)the GST Council
- (b)the Finance Commission
- (c)the NITI Aayog
- (d)the Comptroller and Auditor General
Answer(b) the Finance Commission — Article 280 charges it with recommending the distribution of the net proceeds of taxes between the Union and the States.