Fiscal federalism

In the news

• One year of two-slab GST: Finance Minister cites a wider base and higher collections 5 October 2026 · The Hindu

  Rates were cut, yet collections rose 11.6%. Is that proof the reform worked, or simply the government's own scorecard?

• Karnataka seeks ₹7,142.64 crore in Central drought aid for 177 taluks 4 October 2026 · The Hindu

  Karnataka puts its drought loss at ₹46,324 crore. How much can the Centre's disaster fund actually pay?

• Op-ed: Section 9D of mining law curbs States' mineral taxes, undercutting a 2024 verdict 17 September 2026 · The Hindu

  The Supreme Court said States may tax mineral land. Can Parliament make that power depend on Central conditions?

• PAC flags ₹9,222 crore of cess collections not moved to their reserve funds in 2024-25 9 September 2026 · The Hindu

  A cess is collected for one purpose. So why did ₹9,222 crore of it never reach the funds meant for that purpose?

Key facts

• The 56th GST Council meeting (3 September 2025) adopted a standard rate of 18%, a merit rate of 5% and a special de-merit rate of 40%, effective 22 September 2025 for most goods and services. (5 October 2026)
• Gross GST collections for April to September 2026 were ₹12.46 lakh crore, up 11.6% year on year; September 2026 alone was ₹2,03,521 crore, up 14.7%. (5 October 2026)
• Karnataka sought ₹7,142.64 crore from the NDRF on 3 October 2026 for drought in 177 taluks, against estimated losses of ₹46,324.50 crore. (4 October 2026)
• Rainfall from 1 June to 16 September 2026 was 495 mm against a normal of 766 mm, a 35% deficit. (4 October 2026)
• The MMDR Amendment Bill, 2026 inserts Section 9D, barring State taxes on mineral rights and mineral bearing lands except under conditions or restrictions prescribed by the Centre. (17 September 2026)
• Section 9D(2) invalidates unpaid past State levies but bars refunds of amounts already collected. (17 September 2026)
• The PAC flagged ₹9,222 crore of cess and levy collections in 2024-25 that were not transferred to their designated reserve funds, based on CAG Report No. 6 of 2026. (9 September 2026)
• Cess proceeds are first credited to the Consolidated Fund of India (Article 266(1)) and are meant to be moved to reserve funds, generally in the Public Account of India (Article 266(2)). (9 September 2026)

Previous-year questions

1. 2026 · GS3 · 10 marks Discuss how the contradiction between 'rapid infrastructure development' and 'disaster-risk reduction' in ecologically-sensitive areas of India can be managed, with suitable examples.
2. 2025 · GS2 · 15 marks Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?
3. 2024 · GS2 · 15 marks What changes has the Union Government recently introduced in the domain of Centre-State relations? Suggest measures to be adopted to build the trust between the Centre and the States and for strengthening federalism.
4. 2021 · GS2 · 10 marks How have the recommendations of the 14th Finance Commission of India enabled the States to improve their fiscal position?
5. 2020 · GS3 · 15 marks Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions?
6. 2019 · GS3 · 10 marks Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.
7. 2017 · GS2 · 15 marks Explain the salient features of the constitution (One Hundred and First Amendment) Act, 2016. Do you think it is efficacious enough 'to remove cascading effect of taxes and provide for common national market for goods…
8. 2014 · GS3 · 12.5 marks Drought has been recognised as a disaster in view of its spatial expanse, temporal duration, slow onset and lasting effect on various vulnerable sections. With a focus on the September 2010 guidelines from the National…
9. 2014 · GS2 · 12.5 marks Though the federal principle is dominant in our Constitution and that principle is one of its basic features, but it is equally true that federalism under the Indian Constitution leans in favour of a strong Centre, a…