Which statement is correct in the context of revenue from customs duties as mandated by the Constitution?

It is retained by the Centre completely.

The correct answer is Option (2) → It is retained by the Centre completely.

One of the topics most vigorously debated in the Constituent Assembly was the respective rights of the Central Government and the states. Among those arguing for a strong Centre was Jawaharlal Nehru.

The Draft Constitution provided for three lists of subjects: Union, State, and Concurrent. The subjects in the first list were to be the preserve of the Central Government, while those in the second list were vested with the states. As for the third list, here Centre and state shared responsibility. However, many mor e items were placed under exclusive Union control than in other federations, and more placed on the Concurrent list too than desired by the provinces.

The Constitution also mandated for a complex system of fiscal federalism. In the case of some taxes (for instance, customs duties and Company taxes) the Centre retained all the proceeds; in other cases (such as income tax and excise duties) it shared them with the states; in still other cases (for instance, estate duties) it assigned them wholly to the states. The states, meanwhile, could levy and collect certain taxes on their own: these included land and property taxes, sales tax, and the hugely profitable tax on bottled liquor.