Introduction
The Indian Constitution establishes a federal structure by dividing legislative, administrative, and financial powers between the Centre and States, while maintaining a unitary judiciary. Though both levels are supreme in their domains, coordination is essential for smooth governance. The Constitution provides detailed provisions to balance State autonomy with a strong Union to ensure national integrity.
Legislative Relations
- Articles 245 to 255 in Part XI of the Constitution deal with legislative relations between the Centre and States.
- Legislative powers are divided based on territory and subject matter.
Four key aspects:
- Territorial extent of laws
- Distribution of legislative subjects
- Parliamentary legislation in the State List
- Centre’s control over State legislation
1. Territorial Extent of Central and State Legislation
- Parliament can make laws for entire India, including Union Territories and acquired territories.
- State Legislatures can make laws for their own state only.
- Parliament alone can make extraterritorial laws (applicable to Indian citizens abroad).
- Restrictions on Parliament’s laws:
- President can regulate laws for certain Union Territories (e.g., Andaman & Nicobar, Lakshadweep, Jammu & Kashmir)
- Governors can modify/restrict laws in Scheduled Areas.
- The President/Governor can regulate laws in Tribal Areas (Meghalaya, Tripura, Mizoram, Assam).
2. Distribution of Legislative Subjects (Seventh Schedule)
| List | Number of Subjects | Authority | Examples |
| Union List | 98 | Parliament | Defence, Foreign Affairs, Railways |
| State List | 59 | State Legislature | Police, Agriculture, Public Health |
| Concurrent List | 52 | Both | Education, Marriage, Bankruptcy |
| Residuary Powers | – | Parliament | Cyber Laws, Space Research |
- Parliament prevails in case of a conflict between Central and State laws on Concurrent List matters.
- 42nd Amendment Act (1976) transferred five subjects from State List to Concurrent List:
- Education
- Forests
- Weights & Measures
- Protection of Wild Animals & Birds
- Administration of Justice
- 101st Amendment Act (2016):
o Article 246A grants power to both Parliament & State legislatures to legislate on GST.
o Inter-state GST (IGST) is exclusively under Parliament’s power.
3. Parliamentary Legislation in the State Field
Parliament can legislate on State List subjects under five conditions:
- National Interest (Article 249)
- Rajya Sabha passes a resolution by 2/3rd majority.
- Law remains valid for one year (can be extended).
- National Emergency (Article 250)
- Parliament can legislate on State subjects.
- Law remains valid till six months after the emergency ends.
- States Requesting Parliament (Article 252)
- Two or more states pass a resolution.
- Parliament makes a law (applies only to those states).
- Example: Wild Life (Protection) Act, 1972.
- To Implement International Agreements (Article 253)
- Parliament can override the State List to fulfill international obligations.
- Example: Geneva Convention Act, 1960; Environment Protection Act, 1986.
- President’s Rule (Article 356)
- During President’s Rule, Parliament can legislate on State subjects.
- Such laws remain in force even after the President’s Rule ends.
4. Centre’s Control Over State Legislation
- The Governor can reserve State Bills for the President’s assent.
- Certain bills require prior Presidential approval before being introduced in the State Legislature.
- Financial Bills (during Financial Emergency) must be reserved for President’s approval.
5. Supremacy of Central Law
- Union List prevails over State List & Concurrent List.
- Concurrent List prevails over State List.
- In case of conflict between Central and State laws on a Concurrent List subject, Central law prevails.
- Exception: If a State law gets Presidential assent, it prevails in that state unless overridden by Parliament.
Administrative Relations
Articles 256 to 263 in Part XI of the Constitution deal with the administrative relations between the Centre and the states. In addition, there are various other articles pertaining to the same matter.
1. Distribution of Executive Powers
- Centre’s executive power:
- Covers Union List subjects (e.g., Defence, Railways, Foreign Affairs).
- Includes powers under treaties and agreements.
- State’s executive power:
- Covers State List subjects (e.g., Police, Agriculture, Public Health).
- Concurrent List subjects:
- States execute laws unless Parliament directs otherwise.
2. Centre’s Control Over State Executive Power
- State governments must comply with Central laws (Article 256).
- States cannot interfere with Centre’s executive power (Article 257).
- Article 365: If a state fails to follow Centre’s directions, the President may impose President’s Rule (Article 356).
3. Centre’s Power to Give Directions to States
- Construction & maintenance of communication networks (for military/national importance).
- Protection of railways within the state.
- Providing primary education in the mother tongue to linguistic minorities.
- Welfare schemes for Scheduled Tribes.
4. Mutual Delegation of Functions
- President (with State’s consent) can entrust Centre’s functions to a State.
- Governor (with Centre’s consent) can entrust State’s functions to the Centre.
- Parliament can assign executive powers to states without their consent.
5. Inter-State Coordination (Article 263)
- Parliament can create bodies to resolve inter-state disputes.
- Inter-State Council (1990) formed to improve Centre-State relations.
- Full faith and credit clause ensures state records are valid across India.
6. All-India Services (IAS, IPS, IFS) (Article 312)
- Common to both Centre & States, but recruited and trained by Centre.
- Controlled by both Centre & States, but ultimate authority lies with Centre.
- Ensures administrative uniformity and high standards across the country.
7. Public Service Commissions
- State PSCs – Appointed by Governor, but removed by President.
- Joint PSCs – Created by Parliament for multiple states.
- UPSC can assist States in recruitment matters upon request.
8. Integrated Judicial System
- Single judiciary enforces both Central & State laws.
- State High Court judges appointed & removed by the President.
- Parliament can create a common High Court for two or more states.
9. Relations During Emergencies
- National Emergency (Article 352): Centre controls State administration.
- President’s Rule (Article 356): Centre assumes state functions.
- Financial Emergency (Article 360): Centre directs State financial management.
10. Centre’s Control Over State Administration
- Article 355: Centre must protect states from external aggression & internal disturbance.
- Governor (appointed by President) acts as Centre’s agent.
- State Election Commissioners can be removed only by President.
11. Extra-Constitutional Coordination Mechanisms
- NITI Aayog (replaced Planning Commission) advises on policies.
- Zonal Councils, North-Eastern Council facilitate regional cooperation.
- Key Conferences:
- Governor’s Conference (Presided over by President).
- Chief Ministers’ Conference (Presided over by PM).
- Home Ministers’ Conference (Presided over by Union Home Minister).
Financial Relations
Articles 268 to 293 in Part XII of the Constitution deal with Centre state financial relations. Besides these, there are other provisions dealing with the same subject. These together can be studied under the following heads:
1. Allocation of Taxing Powers
- Parliament has exclusive power to levy taxes on Union List subjects (e.g., customs duty, corporate tax).
- State Legislatures have exclusive power to levy taxes on State List subjects (e.g., land revenue, state excise).
- No tax entries in the Concurrent List, except GST (101st Amendment Act, 2016), which allows both Centre and States to legislate on GST.
- Residuary taxation powers are vested in Parliament (e.g., Gift Tax, Wealth Tax, Expenditure Tax).
- Centre levies and collects certain taxes but shares them with States (e.g., Income Tax).
Restrictions on State Taxing Powers
- Professional tax limit: ₹2,500 per person per year.
- States cannot tax:
- Inter-state supply of goods/services.
- Imports and exports.
- Electricity Tax: Cannot be imposed on electricity used by the Centre or Railways.
- Water & Electricity Tax: Requires President’s approval if imposed on inter-state river projects.
2. Distribution of Tax Revenues
(A) Taxes Levied by Centre but Collected & Appropriated by States (Article 268)
- Stamp duties on financial instruments like cheques, insurance policies.
(B) Taxes Levied & Collected by Centre but Assigned to States (Article 269)
- Inter-state sale of goods (except newspapers).
- Consignment of goods in inter-state trade.
(C) GST on Inter-State Trade (Article 269A)
- Centre levies & collects GST on inter-state transactions.
- Revenue is shared between Centre & States as per GST Council’s recommendations.
(D) Taxes Levied & Collected by Centre but Shared with States (Article 270)
- All Union List taxes (except those under Articles 268, 269, 269A, and 271) are shared.
- The Finance Commission recommends sharing formulas.
(E) Surcharge on Taxes (Article 271)
- Parliament can levy surcharges on taxes for Centre’s exclusive use.
- States have no claim over surcharge revenue.
- GST is exempt from surcharge.
(F) Taxes Levied & Collected by States
- Land Revenue, Agricultural Income Tax, Excise on Alcohol, Property Tax, Entertainment Tax, Stamp Duty, Vehicle Tax, etc.
3. Non-Tax Revenues
| Source | Centre | States |
| Public Services | Railways, Post, Banking | Irrigation, Forests, Fisheries |
| Enterprises | PSUs, Coal, Oil | State PSUs |
| Escheat & Lapse | Unclaimed property goes to Centre | Unclaimed property goes to State |
4. Grants-in-Aid to States
(A) Statutory Grants (Article 275)
- For States in need of financial assistance.
- For Scheduled Tribes & Scheduled Areas.
- Charged on Consolidated Fund of India.
(B) Discretionary Grants (Article 282)
- Centre grants funds for any public purpose, even outside its legislative powers.
- Used to support State projects and influence policies.
(C) Special Temporary Grants
- Grants given to specific States for a fixed period (e.g., Jute export duty grants to Assam, Bihar, West Bengal, Odisha).
5. GST Council (Article 279A)
- Constituted by the President to coordinate Centre-State GST policies.
- Makes recommendations on:
- GST rates and exemptions.
- Revenue-sharing formula.
- Special GST rates for calamities.
6. Finance Commission (Article 280)
- Appointed by the President every five years.
- Recommends:
- Tax revenue sharing between Centre & States.
- Principles for grants-in-aid.
- Ways to strengthen local government finances.
7. Borrowing Powers
| Centre | States |
| Can borrow internally & externally. | Can borrow only within India. |
| Needs Parliamentary approval for borrowing limits. | Needs Centre’s approval if it has pending Central loans. |
| Can lend money to States. | Cannot borrow externally. |
8. Financial Emergency (Article 360)
- President can direct States to:
- Reduce government salaries.
- Follow Centre’s financial instructions.
- Reserve financial bills for President’s approval.
9. Inter-Governmental Tax Immunities
(A) Centre’s Property Exempt from State Taxes
- States cannot tax Central government properties unless Parliament allows.
(B) State’s Property Exempt from Central Taxes
- Centre cannot tax State government property or income unless Parliament provides.
10. Financial Relations During National Emergency
- President can modify Centre-State financial arrangements.
- The Centre can reduce salaries of government employees and impose financial restrictions.
Trends in Centre-State Relations
1. Shift in Centre-State Relations Post-1967
- Before 1967: Smooth relations due to one-party dominance (Congress) at both Centre and State levels.
- After 1967: Rise of regional parties led to demands for greater state autonomy and decentralization.
- Tensions arose over issues like:
- Governor’s appointment & dismissal.
- Imposition of President’s Rule (Article 356).
- Financial allocation discrimination.
- Encroachment on State List subjects.
2. Key Issues in Centre-State Tensions
- Governor’s role & appointment process.
- Misuse of President’s Rule (Article 356) for political gains.
- Deployment of Central forces in States.
- Reservation of State Bills for President’s assent.
- Central control over State finances & Planning Commission’s interference.
- Management of All-India Services (IAS, IPS, IFS).
- Encroachment on State List subjects.
3. Major Committees & Reports on Centre-State Relations
(A) Administrative Reforms Commission (ARC) – 1966
Key Recommendations:
o Inter-State Council should be established under Article 263.
o Non-political & experienced Governors should be appointed.
o Greater financial autonomy for States.
o Central forces should be deployed in States only on request.
o No action was taken by the Centre.
(B) Rajamannar Committee – 1969
- Formed by Tamil Nadu Government (DMK) to demand State autonomy.
- Key Recommendations:
- Inter-State Council should be set up.
- Finance Commission should be a permanent body.
- The Planning Commission should be abolished.
- Articles 356, 357, 365 (President’s Rule) should be removed.
- Residuary powers should go to the States.
- Abolition of All-India Services (IAS, IPS, IFS).
- Centre ignored the recommendations.
(C) Anandpur Sahib Resolution – 1973
- Passed by Akali Dal in Punjab, demanding:
- Residuary powers to States.
- The Centre should control only Defence, Foreign Affairs, Communications, and Currency.
(D) West Bengal Memorandum – 1977
- Submitted by Communist-led government.
- Key Demands:
- Replace “Union” with “Federal” in the Constitution.
- Residuary powers to States.
- President’s Rule & Financial Emergency (Article 356 & 360) should be repealed.
- Centre should share 75% of its revenue with States.
- All-India Services should be abolished.
- Centre rejected the demands.
(E) Sarkaria Commission – 1983
- Appointed by the Central Government to review Centre-State relations.
- Key Observations:
- Federalism is a functional arrangement for cooperative action.
- Strong Centre is necessary to maintain national unity.
- Over-centralization weakens federalism.
Key Recommendations:
- Inter-State Council should be set up (Implemented in 1990).
- President’s Rule (Article 356) should be used sparingly.
- All-India Services should be strengthened.
- Residuary taxation powers should remain with Parliament.
- Governors should communicate reasons for withholding assent on State Bills.
- Zonal Councils should be revitalized.
- States should be consulted before enacting laws on Concurrent List subjects.
- Governors cannot dismiss a State government with a majority.
- Surcharge on Income Tax should be limited.
- Centre should not misuse radio & TV for political purposes.
- Centre implemented approximately 180 out of 247 recommendations, including setting up the Inter-State Council.
(F) Punchhi Commission – 2007
- Reviewed Centre-State relations post-economic reforms & coalition politics.
- Key Recommendations:
- Federalism should be cooperative, not confrontational.
- Governor should be an independent, non-political figure.
- Central intervention in States should be limited.
- Inter-State disputes should be resolved through negotiations.
- State consent should be mandatory for deploying Central forces.
- Inter-linking of rivers should involve full State participation.
- Strong Centre needed for national security & economic planning.
- Report submitted in 2010, but not fully implemented.
