Page 137 - DMGT401Business Environment

Business Environment

Notes 6.1.5 Financial Power of Central and State Governments

The constitution of India divides the functions and financial powers of the government between
the Central and the State together with the concurrent areas. It also provides for sharing of taxes
in various forms and the system of grants- in-aids. The Seventh Schedule of the Constitution of
India divides the functions and financial resources between the Centre and States. It contains
three lists namely, List I or Union List, List II or State List, and List III or Concurrent List.
List I: Union List. This comprises the following items:

Tax Revenue

The Union List contains of 97 items contains the following sources of tax revenues for the
Central Government:

1. Taxes on income other than agricultural income.
2. Duties on customs including exports duties.
3. Duties of excise on tobacco and other goods manufactured or produced in India except (a)
alcoholic liquors for human consumption and (b) opium, Indian hemp and other narcotic
drugs and narcotics, but including medicinal and toilet preparations containing alcohol or
any substance included this paragraph (entry 84).
4. Corporation Tax.
5. Taxes on the capital value of assets exclusively of agricultural land of individuals and
companies, and taxes on the capital of companies.
6. Estate duty in respect of succession to property other than agricultural land.
7. Duties in respect of succession to property other than agricultural land.
8. Terminal taxes on goods or passengers carried by railways, sea, or air taxes on railways
fares and freights.
9. Taxes on the sale stamp duties on transactions in stock exchanges and future markets.
10. Rates on stamp duty in respect of bills of exchange, cheque, promissory notes, bills of
lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and
receipts.
11. Taxes on sale or purchase of newspapers and on advertisements published therein.

12. Taxes on sale or purchase of goods other than newspaper where such sale or purchase
takes place in the course of inter-state trade or commerce.
13. Taxes on inter-state consignments of goods for trade or commerce.

14. Fees in respect of any of the matters in the list but not including fees taken in any court.
15. Fees taken in the Supreme Court.

Non-tax Revenue

Non-tax revenue includes borrowings (both internal and external), income from various
government undertakings and monopolies, income from government property, etc.

130 LOVELY PROFESSIONAL UNIVERSITY