Financial resources are distributed according to highly sophisticated structures in India which have led to

increased financial reliance of the states on the federal government. such a concept is obviously harmful
to state autonomy. it is reasonable to argue that in order to obtain political autonomy Indian states
should be given more financial autonomy than they currently have for which they have started
demanding more fiscal autonomy. several proposals have been made in response to states’ rising
aspiration for a new approach to the center-state relationship in which states would have more control
over policy and regulatory affairs.

States have wanted a larger share of the central divisible pool of taxes in
order to boost their tax collection and share of tax proceeds in order to
achieve financial independence from the center. Furthermore, states have
expressed concern about the new unified tax policy GST and have asked
adequate compensation in the event of a revenue decrease during the
program's initial few years of implementation.

The current practice of assigning particular funding to any

state is done through schemes, which contain guidelines for how the funds
are to be used which are devoted to certain aims and issues that the Centre deems
important for the state, often at the expense of what is genuinely required in such
states. Governments at all levels have a responsibility to reflect their constituents'
interests and needs. As a result, they tend to be better judges of the importance and
relevance of a given topic. As a result, states claim that if they don't have the right to
decide how such funds are used, large sums of money are regularly spent on projects
that are neither beneficial to the local population nor, in the long run, beneficial to the
Center.
As a result, many state governments believe that state governments should
have authority in allocating federal funds. This would allow the local
government body to pick and choose the more critical problems and
resources required for operations, rather than having issues and resources thrust upon
them by someone outside the local system. Without autonomy,
funds will continue to be allocated to plans and programmes that may or
may not be beneficial to the intended section of the population or the state, leading in a
waste of valuable resources and an increase in corruption,
bribery, and misuse.

each state's revenue and spending needs are different, revenue

redistribution is required. As a result, in order to achieve equilibrium,
redistribution is required. in order to
maintain parity, two equally well-off people living in different provinces
should be similarly well-off when it comes to taxation and the provision of
public goods. In conclusion, the fact that they live in two different regions
should have no bearing on their happiness. As a result, disparities between
states should have no bearing on the happiness of two people who are
otherwise identical but live in different states. This is an attempt to find a
solution to the problem of horizontal disparity
states want the centre to cooperate with
them on issues of national importance such as health, education, terrorism
and rioting, among other things. Shared and sharable taxes should have a
broader range of application, and
By including corporate tax and surcharges on income tax in a divisible pool
with 60 percent of the receipts going to the states, and by including sales tax in a
divisible pool with 60 percent of the receipts going to the states
Increasing the share of excise charges paid by states from 40% to 60% will
help to alleviate poverty.

The right of states to fiscal autonomy has been upheld by the Supreme
Court:- When it comes to designing their fiscal legislation, states have the
right to financial autonomy, according to a recent decision by a nine-judge
bench of the Supreme Court in the context of entry taxes. 1. Among other
things, the court determined that Article 301 of the Constitution does not
apply to taxes (Free trade between states ensured in Article 301). As a
result, the application of an entry tax cannot be construed as a constraint
on the freedom of business and trade. The court has also overruled the
concept of compensatory taxes,' which had been created in earlier rulings,
holding that the concept of 'compensatory taxes' does not have any legal
foundation in the first place.

it is essential that federal and state governments function independently in

their separate, constitutionally specified domains of action. it becomes equally
important that each branch of
government be provided with sources of money adequate to enable it to carry out the
obligations that have been assigned to it by the people who
have elected it to serve. In order for the federal form of government to
function properly, the federal government's financial independence and
adequacy must be ensured. Specifically, the Finance Commission is
envisioned in the Constitution as the primary organization responsible for
resolving fiscal imbalances that exist between the federal government and
its constituent governments, as well as between the federal government
and its constituent governments.