Multiple-choice questions (MCQs) with answers on “Centre-State Financial Relations: A Critical Examination” suitable for the Civil Services Examination

Which of the following lists is primarily concerned with financial powers in India?
- A) State List
- B) Concurrent List
- C) Union List
- D) All of the above
- Answer: C) Union List
The distribution of financial resources between the Centre and the States is primarily governed by which Article of the Indian Constitution?
- A) Article 280
- B) Article 245
- C) Article 356
- D) Article 110
- Answer: A) Article 280
Which body is responsible for recommending the distribution of taxes between the Centre and States?
- A) Finance Commission
- B) Planning Commission
- C) NITI Aayog
- D) Reserve Bank of India
- Answer: A) Finance Commission
What is the primary source of revenue for the Centre in India?
- A) Sales tax
- B) Excise duty
- C) Income tax
- D) Property tax
- Answer: C) Income tax
Which of the following is NOT a source of revenue for State Governments?
- A) Stamp duty
- B) Income tax
- C) Sales tax
- D) State excise duty
- Answer: B) Income tax
Which article mandates the establishment of the Finance Commission?
- A) Article 280
- B) Article 265
- C) Article 300
- D) Article 356
- Answer: A) Article 280
Which of the following taxes is levied by both the Centre and the States?
- A) Income tax
- B) GST
- C) Custom duty
- D) Wealth tax
- Answer: B) GST
The recommendation of the Finance Commission is:
- A) Binding on the Centre
- B) Binding on the States
- C) Advisory
- D) Mandatory for all governments
- Answer: C) Advisory
The ‘Constitutional Amendment’ for the introduction of GST in India is:
- A) 99th Amendment
- B) 101st Amendment
- C) 103rd Amendment
- D) 100th Amendment
- Answer: B) 101st Amendment
Which of the following is a feature of cooperative federalism in India?
- A) Centralized power
- B) Conflict between Centre and States
- C) Joint decision-making
- D) Unilateral tax distribution
- Answer: C) Joint decision-making
Which article deals with the imposition of duties on the goods exported from the State?
- A) Article 286
- B) Article 287
- C) Article 288
- D) Article 289
- Answer: C) Article 288
The concept of ‘Fiscal Federalism’ refers to:
- A) Political relations between Centre and States
- B) Financial relations and distribution of resources
- C) Social policies of the government
- D) Economic development of states
- Answer: B) Financial relations and distribution of resources
Which of the following is a primary challenge in Centre-State financial relations?
- A) Excessive fiscal autonomy of States
- B) Central dominance over State revenues
- C) Lack of tax base in States
- D) Inefficient public spending by States
- Answer: B) Central dominance over State revenues
The share of States in the net proceeds of taxes is determined by:
- A) Planning Commission
- B) Finance Commission
- C) Ministry of Finance
- D) NITI Aayog
- Answer: B) Finance Commission
Which article provides for the distribution of financial resources between the Centre and States?
- A) Article 270
- B) Article 268
- C) Article 269
- D) Article 271
- Answer: A) Article 270
Which of the following is a tax that cannot be levied by the States?
- A) Sales tax
- B) Income tax
- C) Custom duty
- D) Stamp duty
- Answer: C) Custom duty
Which institution is NOT involved in the financial distribution between Centre and States?
- A) Finance Commission
- B) NITI Aayog
- C) Reserve Bank of India
- D) Planning Commission
- Answer: C) Reserve Bank of India
Which of the following articles empowers the Centre to provide grants-in-aid to States?
- A) Article 275
- B) Article 280
- C) Article 286
- D) Article 289
- Answer: A) Article 275
The implementation of GST is aimed at:
- A) Reducing taxes
- B) Simplifying tax structure
- C) Increasing state revenues
- D) Centralizing taxation
- Answer: B) Simplifying tax structure
Which of the following is an effect of fiscal decentralization?
- A) Increased regional disparities
- B) Enhanced local governance
- C) Centralized decision-making
- D) Uniform development across States
- Answer: B) Enhanced local governance
The constitutional provision that requires the Centre to consult the States on matters affecting them is:
- A) Article 252
- B) Article 253
- C) Article 256
- D) Article 263
- Answer: C) Article 256
Which is a consequence of the Centre’s power to impose taxes on States?
- A) Increased autonomy of States
- B) Enhanced fiscal capacity of States
- C) Diminished financial independence of States
- D) Equalization of resources
- Answer: C) Diminished financial independence of States
Which of the following is a feature of the Goods and Services Tax (GST) in India?
- A) Single tax for all goods
- B) Dual GST model
- C) Imposed solely by the Centre
- D) Excludes service tax
- Answer: B) Dual GST model
Which article defines the distribution of taxes between the Union and the States?
- A) Article 265
- B) Article 266
- C) Article 267
- D) Article 268
- Answer: D) Article 268
Which of the following is an example of vertical imbalance in Indian federalism?
- A) Inequitable distribution of resources
- B) Disparities in State revenue generation
- C) Over-dependence on Central grants
- D) All of the above
- Answer: D) All of the above
The difference between Central taxes and State taxes is primarily based on:
- A) Tax rates
- B) Type of goods and services
- C) Jurisdiction
- D) Tax collection methods
- Answer: C) Jurisdiction
The ‘Goods and Services Tax Network’ (GSTN) is responsible for:
- A) Collecting GST
- B) Developing technology and infrastructure for GST
- C) Distributing GST revenue to States
- D) None of the above
- Answer: B) Developing technology and infrastructure for GST
Which of the following reflects the principles of fiscal federalism?
- A) Centralized revenue generation
- B) Decentralized service delivery
- C) State-centric policies
- D) Federal expenditure control
- Answer: B) Decentralized service delivery
Which of the following fiscal measures is aimed at reducing the financial dependence of States on the Centre?
- A) Increased grants-in-aid
- B) Enhanced revenue generation capabilities
- C) Centralization of resources
- D) Fiscal deficits
- Answer: B) Enhanced revenue generation capabilities
Which article mandates the Centre to finance the developmental projects in the States?
- A) Article 274
- B) Article 275
- C) Article 276
- D) Article 277
- Answer: B) Article 275

These questions and answers cover various aspects of Centre-State financial relations, including constitutional provisions, the role of the Finance Commission, and challenges within the framework of Indian federalism.

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