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Fiscal Federalism — GK Questions with Answers

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26 questions
  1. Who gave us the term 'fiscal federalism'
    1. Adam Smith
    2. Richard Musgrave
    3. J. M. Keynes
    4. Milton Friedman
    Show answer

    Answer: (B) Richard Musgrave

    The term was given in 1959 by Richard Musgrave, an economist born in Germany who later became known as American.

  2. Which part of the Constitution carries centre-state financial relations
    1. Part IV
    2. Part IX
    3. Part XI
    4. Part XII
    Show answer

    Answer: (D) Part XII

    Part XII, Articles 265 to 293, along with the Seventh Schedule, carries the details.

  3. Under Article 268, who levies the tax and who collects it
    1. The Centre levies it and the Centre collects it
    2. The Centre levies it and the states collect it
    3. The states levy it and the Centre collects it
    4. The states levy it and the states collect it
    Show answer

    Answer: (B) The Centre levies it and the states collect it

    A tax such as stamp duty is levied by the Centre, but the states do the collecting and keep the money.

  4. Under Article 270, whose recommendation decides how a tax is split
    1. NITI Aayog
    2. The GST Council
    3. The Finance Commission
    4. The Planning Commission
    Show answer

    Answer: (C) The Finance Commission

    Taxes under Article 270 are levied and collected by the Centre, but split between Centre and states on the Finance Commission's recommendation.

  5. Where does the surcharge revenue under Article 271 go
    1. Entirely to the Centre
    2. Entirely to the states
    3. Split equally
    4. Deposited with the Finance Commission
    Show answer

    Answer: (A) Entirely to the Centre

    Every rupee earned from a surcharge under Article 271 goes straight to the Centre, with no sharing at all.

  6. Under Article 274, which of these needs the President's prior recommendation
    1. Raising the defence budget
    2. A bill changing the principles of distributing money to states
    3. Launching a new scheme
    4. Changing a GST rate
    Show answer

    Answer: (B) A bill changing the principles of distributing money to states

    Bills touching a tax states have a stake in, the meaning of "agricultural income", or the principles of distributing money to states, all need the President's prior recommendation.

  7. On whose recommendation are grants under Article 275 given
    1. The GST Council
    2. NITI Aayog
    3. The Finance Commission
    4. A state legislature
    Show answer

    Answer: (C) The Finance Commission

    Statutory grants under Article 275 are given on the Finance Commission's recommendation, chiefly for the welfare of Scheduled Tribes.

  8. Who can give discretionary grants under Article 282
    1. Only the Centre
    2. Only a state
    3. Both the Centre and a state
    4. Only the Finance Commission
    Show answer

    Answer: (C) Both the Centre and a state

    Under Article 282, either the Centre or a state can give a grant for any public purpose.

  9. Vertical transfer happens between whom
    1. One state and another
    2. The Centre and all the states
    3. Two Union Territories
    4. A municipality and a panchayat
    Show answer

    Answer: (B) The Centre and all the states

    Vertical transfer decides how much, out of the Centre's total tax revenue, goes to the states as a whole.

  10. Which Article created the GST Council
    1. Article 280
    2. Article 279A
    3. Article 270
    4. Article 265
    Show answer

    Answer: (B) Article 279A

    The GST Council is a constitutional body, created by Article 279A.

  1. How much voting weight does a decision in the GST Council need
    1. 51%
    2. 60%
    3. 67%
    4. 75%
    Show answer

    Answer: (D) 75%

    A decision needs 3/4, that is 75%, of the vote; the Centre's own weight alone is 1/3.

  2. Which problem of the GST Council is called a "virtual veto"
    1. States can decide things on their own
    2. No decision can pass without the Centre
    3. States have no representative on the Council
    4. The Centre has no vote at all
    Show answer

    Answer: (B) No decision can pass without the Centre

    The Centre's vote is 1/3 and a decision needs 3/4, so almost nothing can pass without the Centre's consent.

  3. An example of a Central Sector Scheme
    1. MGNREGA
    2. Ayushman Bharat
    3. PM-Kisan
    4. Mid-Day Meal
    Show answer

    Answer: (C) PM-Kisan

    PM-Kisan is a Central Sector Scheme, because the entire funding comes from the Centre.

  4. The "Core of the Core" category of schemes came about after which Commission's recommendations
    1. The 12th Finance Commission
    2. The 13th Finance Commission
    3. The 14th Finance Commission
    4. The 15th Finance Commission
    Show answer

    Answer: (C) The 14th Finance Commission

    CSS were sorted into three categories following the 14th Finance Commission's recommendations and the restructuring that followed.

  5. What is the CSS funding ratio for north-eastern and Himalayan states
    1. 50:50
    2. 60:40
    3. 75:25
    4. 90:10
    Show answer

    Answer: (D) 90:10

    Because of their difficult terrain and weaker revenue capacity, these states get help in a 90% Centre, 10% state ratio.

  6. Whose consent does a state need before taking a fresh loan, if an older Centre-given loan is still outstanding
    1. Its own state legislature
    2. The Finance Commission
    3. The central government
    4. The GST Council
    Show answer

    Answer: (C) The central government

    A state that still owes money on a loan the Centre gave or guaranteed cannot take a fresh loan without the Centre's consent.

  7. Which states first received SCS in 1969
    1. Punjab, Haryana, Himachal Pradesh
    2. Jammu & Kashmir, Assam, Nagaland
    3. Sikkim, Meghalaya, Mizoram
    4. Telangana, Uttarakhand, Tripura
    Show answer

    Answer: (B) Jammu & Kashmir, Assam, Nagaland

    Following the 5th Finance Commission's recommendation, the status first went to Jammu & Kashmir, Assam and Nagaland, in 1969.

  8. Which of these is not a Gadgil formula criterion
    1. Hilly terrain
    2. Strategic border location
    3. A large tribal population
    4. High industrial output
    Show answer

    Answer: (D) High industrial output

    SCS criteria rest on backwardness and difficult geography; high industrial output is not one of them.

  9. When did the 14th Finance Commission effectively stop fresh SCS grants
    1. 2011
    2. 2013
    3. 2015
    4. 2017
    Show answer

    Answer: (C) 2015

    It saw the arrangement as an unnecessary burden on the Centre, so from 2015 it chose instead to give every state a higher tax share.

  10. Under which Article, and how often, is the Finance Commission set up
    1. Article 275, every 3 years
    2. Article 280, every 5 years
    3. Article 279A, every 5 years
    4. Article 282, every 10 years
    Show answer

    Answer: (B) Article 280, every 5 years

    The Finance Commission is set up under Article 280, and the President constitutes it every 5 years.

  1. Who was the chairman of the first Finance Commission
    1. K. C. Neogy
    2. A. K. Chanda
    3. Mahaveer Tyagi
    4. Y. B. Chavan
    Show answer

    Answer: (A) K. C. Neogy

    K. C. Neogy chaired the first Finance Commission, set up in 1951.

  2. By how much did the 14th Finance Commission raise the states' tax share
    1. 38%
    2. 40%
    3. 42%
    4. 45%
    Show answer

    Answer: (C) 42%

    The share climbed from 32% to 42% — no other Commission has ever pushed it up by so much in one step.

  3. By how much, and for what reason, did the 15th Finance Commission cut the states' share
    1. To 40%, for an old deficit
    2. To 41%, for the new J&K-Ladakh UTs
    3. To 39%, because of Covid
    4. To 41%, because of GST
    Show answer

    Answer: (B) To 41%, for the new J&K-Ladakh UTs

    The cut was not taken away from the states; it let the Centre fund the newly formed J&K and Ladakh Union Territories out of its own share.

  4. Who chairs the 16th Finance Commission
    1. N. K. Singh
    2. Y. V. Reddy
    3. Arvind Panagariya
    4. C. Rangarajan
    Show answer

    Answer: (C) Arvind Panagariya

    Arvind Panagariya has chaired the 16th Finance Commission since 31 December 2023.

  5. Which factor carries the heaviest weight in the 16th Finance Commission's horizontal formula
    1. Area
    2. Forest cover
    3. Income distance
    4. Population
    Show answer

    Answer: (C) Income distance

    Income distance carries a weight of 42.5% — far more than any of the other five factors.

  6. When was the 16th Finance Commission's report laid before Parliament
    1. 17 November 2025
    2. 31 December 2023
    3. 1 February 2026
    4. 1 April 2026
    Show answer

    Answer: (C) 1 February 2026

    The report was handed to the President on 17 November 2025, but laid before Parliament alongside Budget 2026-27 on 1 February 2026.

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