UPSC Prelims 2003 Q50: Indian Polity – Public Finance & Finance Commission
Consider the following statements: In India, stamp duties on financial transactions are
1. Levied and collected by the State Government
2. Appropriated by the Union Government.
Which of these statements is/are correct?
- (a) Only 1
- (b) Only 2
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer: (d) Neither 1 nor 2
Explanation
Stamp duties on financial transactions
| Statement | Verdict |
|---|---|
| 1. Levied and collected by the State Government | False: stamp duties on bills of exchange, cheques, etc. are levied by the Union (Entry 91, Union List), though collected and appropriated by the States |
| 2. Appropriated by the Union Government | False: the proceeds are assigned to the States under Article 268 |
Neither statement is correct: these duties are levied by the Union but collected and kept by the States where they are leviable.
Answer: (d) Neither 1 nor 2.
Why each option is right or wrong
- (a) Incorrect. They are levied by the Union, not by the States.
- (b) Incorrect. The proceeds go to the States, not the Union.
- (c) Incorrect. Both statements are false.
- (d) CORRECT. Neither statement is correct.
Key point
Article 268: duties levied by the Union but collected and appropriated by the States.
Remember
Stamp duties on financial documents are levied by the Union but go to the States.
Common mistakes
- Thinking the Union both levies and keeps the proceeds.
- Confusing Article 268 with Article 269.
- Believing that stamp duty is only a State subject.
Exam tip
Union levies, States collect and keep: Article 268.
Sources
- Constitution of India — Article 268
- M. Laxmikanth — Indian Polity (Centre–State Relations)