Which statement is correct in the context of revenue from customs duties as mandated by the Constitution?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → It is retained by the Centre completely.
The Constitution mandated a complex system of fiscal federalism: some taxes went wholly to the Centre, some were shared with the states, and some were assigned wholly to the states.
Option (1) It is collected by States completely. — Incorrect. Taxes assigned wholly to the states were of another kind, such as estate duties; customs duties did not go to the states.
Option (2) It is retained by the Centre completely. — Correct. In the case of some taxes, for instance customs duties and Company taxes, the Centre retained all the proceeds.
Option (3) It is shared between Centre and State. — Incorrect. Taxes such as income tax and excise duties were shared with the states; customs duties were not.
Option (4) Customs duties was abolished by the Constitution. — Incorrect. The Constitution did not abolish customs duties; it placed their whole proceeds with the Centre.
NCERT (2026-27): “4. The Powers of the State … 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.…” |