INTRODUCTION

 India follows a federal shape in which the powers are shared among each centre and
the states. It's also stated that India follows a quasi-federal shape in which the central
government enjoys greater powers over the states. The financial resources that have
been positioned at the disposal of the state are so meager that they've to look up to
the Union Government for subsidies and contributions. Articles 268 to 281 of the
Indian Constitution contain provisions providing guidelines for the center regarding
the allocation of financial resources among the states. CAG is an independent
authority under the Constitution of India.He is the head of the Indian audit & account
department and chief Guardian of Public purse.It is the institution through which the
accountability of the government and other public authorities (all those who spend
public funds) to Parliament and State Legislatures and through them to the people is
ensured.
FINANCIAL ACCOUNTABILITY
Article 268
 Article 268 deals with stamp duty levied by the Union but collected and distributed by
the States.
 These taxes are not included in the Consolidation Fund of India and are allocated by
the same state in which they are levied, so they do not contribute to the Indian
Consolidation Fund.
 With the 88th amendment to the Constitution, a new provision 268 A was included
in this article, which included the tax on services in its ambit, but it was again
excluded by the 101st Amendment to the Constitution and the introduction of GST.
Article 269
 It is a tax levied on all interstate purchases, sales and transportation of goods, except
those mentioned in section 269 A and in newspapers.
 Taxes are collected and collected by the central government but are distributed by
the state governments. The tax levied under this clause is not included in the
consolidated fund of India.
Article 269 A
The 101st Constitutional Amendment introduced a new provision 269A, which introduced
a number of significant changes.
Article 269A (1) mainly deals with the following aspects:
Taxation and collection of tax on goods and services (GST).
 This is applicable in the case of Inter-state trade or commerce.
 The collected taxes will be distributed between the states and the Union.
 Parliament has the power to pass legislation on the distribution of taxes levied in
accordance with this article, in accordance with the recommendations of the GST
Council.
 Goods and Services Tax (GST) on supplies in interstate trade or commerce levied
and collected by the Center; however, this fee is divided between the Center and the
states, as in manner provided by parliament in accordance with the
recommendations of the GST Council.
 Parliament is also empowered to develop guidelines for where and when the supply
of goods or services, or both, takes place in the course of interstate trade or
commerce.
Article 270
 Taxes are collected and levied by the Center, but are allocated between the Center
and the states (Article 270).
This category includes all taxes and levies mentioned in the List of the Union, with
the exception of the following:
 Duties and taxes are referred to in Article 268, 269 and 269 A.
 Surcharges on taxes and duties referred to in Article 271.
 Any levies received for specific purposes.
 The 101st Amendment added two new sub-clauses, Section 270 (1A) and 270 (1B)
under this Article. The tax allocated between the Center and the state was revised
after the introduction of the GST.
Article 271
 Parliament has the right to increase taxes or duties at any time by introducing
additional charges, except in the case of the goods and services tax referred to in
section 246A.
 All income generated from surcharges will be part of India's consolidated fund. Taxes
will be withheld by Parliament and will not be shared between states.
Distribution Of Non-tax Revenues
1. The Centre – receipts from Posts & telegraphs, Banking Railways, Broadcasting,
Coinage & currency, Escheat & lapse.
2. The States – receipts from Irrigation, Forests, Fisheries, State PSE, Escheat & lapse
Grant-in-aids process
How States Get Grant-in-aids From The Centre?
 In addition to the distribution of taxes between the Center and the states, there are
several provisions in the Constitution that regulate the scope for Grants-in-aid.
 In accordance with Article 275 and 282, Parliament may provide grants-in-aid from
the Consolidation Fund of India to such states as they needed assistance, especially
to improve the welfare of the tribal areas, including a special grant to Assam.
Statutory Grants
 Statutory grant is provided in Article 275 of the Indian Constitution.
 Parliament provides these grants to specific states that need assistance.
 This article sets different grants for different states.
 Amount transferred from India Consolidated Fund.
 There are two conditions for granting aid to the states for any development plan
approved by the Indian government for the benefit of the Scheduled areas and
Scheduled tribes, with a particular focus on Assam.
 Any parliamentary regulation relating to Grants-in-aid as specified is subject to prior
recommendation by the Finance Committee.
Discretionary Grants
 In accordance with Article 282, the Center may, at its discretion, provide assistance
to certain states for public purposes.
 These Grants are optional, not compulsory in nature.
 The Center previously issued these grants on the recommendation of a planning
commission.
 Moreover, during the period of the planning commission, the general discretionary
grants were even higher than the statutory grants.
Other Grants
 Grants for a temporary period
 Grants provided in lieu of export duties on jute & jute products to the states of
Assam, Bihar, W. Bengal & Orissa.
 Charged on Consolidated Fund
 Recommended by FC
CAG derives its audit mandate from different sources like–
Constitution (Articles 148 to 151)
The Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act,
1971
Important Judgments
Instructions of Government of India
Regulations on Audit & Accounts-2007
CAG audits the accounts related to all expenditure from the Consolidated Fund of India,
Consolidated Fund of each state and UT’s having a legislative assembly.He audits all
expenditure from the Contingency Fund of India and the Public Account of India as well
as the Contingency Fund and Public Account of each state.He audits all trading,
manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts
kept by any department of the Central Government and the state governments.He audits
the receipts and expenditure of all bodies and authorities substantially financed from the
Central or State revenues; government companies; other corporations and bodies, when
so required by related laws.He audits the accounts of any other authority when
requested by the President or Governor e.g. Local bodies.He advises the President with
regard to prescription of the form in which the accounts of the Centre and States shall be
 kept.He submits his audit reports relating to the accounts of the Centre to the President,
who shall, in turn, place them before both the houses of Parliament.He submits his audit
reports relating to the accounts of a State to the Governor, who shall, in turn, place them
before the state legislature.CAG also acts as a guide, friend and philosopher of the
Public Accounts Committee of the Parliament.

CONCLUSION

As a result, we can come to the following conclusion. Without a certain, no state can afford
to operate without the active financial support of the federal government. It is also
indisputable that Indian states have a lower degree of economic independence than any
other federation in the world because their reliance on the central government is so
significant.