Question

Prior to the amendment in 2000, which tax was levied and collected by the Union but distributed between the Union and the States in India?

• A. Central Sales Tax
• B. Consignment Taxes
• C. Income Tax
• D. None of the above

Hint:

Think about Article 270 of the Constitution as it stood before the year 2000.

Answer 1

The Correct Option is C

This question tests basic knowledge of how tax revenue was shared between the Union and the States under the original scheme of the Constitution, before the 80th Constitutional Amendment Act came into force in the year 2000.

1. Central Sales Tax: This tax is levied by the Union on inter-state sale of goods, but it is collected and kept fully by the state from which the goods are sold. It was never part of the shared divisible pool, so this option does not fit.
2. Consignment Taxes: A tax on consignment of goods was proposed at one point as a way to plug revenue loss from inter-state stock transfers, but it was never actually levied and collected as a regular shared tax. It cannot be the answer here.
3. Income Tax: Under the original Article 270 of the Constitution, tax on income other than agricultural income was levied and collected by the Union government, but the whole amount, minus a small collection charge, had to be shared with the States as decided by the Finance Commission. This continued right up to the year 2000.
4. None of the above: Since Income Tax fits the description exactly, this option is ruled out.

The correct option is Income Tax. The 80th Constitutional Amendment Act, 2000 changed this arrangement by replacing the old scheme with a wider divisible pool that includes almost all central taxes, not income tax alone, based on the recommendation of the Tenth Finance Commission.

Let's summarize:

• Before 2000, only income tax, excluding agricultural income, was collected by the Union and shared with the States under Article 270.
• After the 80th Amendment, a broader pool of central taxes is shared, not income tax alone.

So, the tax that was levied and collected by the Union but distributed between the Union and the States before the 2000 amendment was Income Tax.