Tax devolution is largely unconditional; states can use these funds as they deem fit according to their own priorities and budgetary processes. Grants, especially Centrally Sponsored Scheme (CSS) grants, are often tied to specific programmes or schemes and come with conditionalities regarding their utilization. Therefore, increasing the share of tax devolution inherently increases the proportion of unconditional transfers available to the States, giving them greater fiscal autonomy.
Compositional shift from grants to tax devolution from Centre to State causes
Asked in APPSC Group 1 Prelims 2016 · Topic: The Centre-State Relations (Financial Relations: Allocation of Revenue, Taxation Powers, and Grants-in-Aid)
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Answer: B. increase in share of unconditional transfers to States
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