The concept of "Resources & Distribution" in Indian polity is a constitutional provision and mechanism of fiscal federalism that governs the allocation of financial resources, primarily tax revenues, between the Union and State governments. This framework is detailed in Part XII of the Constitution, titled Finance, Property, Contracts and Suits. The scheme for the distribution of revenue sources is historically rooted in the Government of India Act 1935. It was created to solve the problem of ensuring that both the Union and the States, operating in a quasi-federal system, have adequate financial resources to discharge their respective constitutional responsibilities.
The mechanism is primarily laid out in Articles 268 to 281 of the Constitution. It works through various categories of taxes and duties: for instance, Article 268 covers duties levied by the Union (like stamp duties on bills of exchange) but collected and appropriated entirely by the States. Article 270 mandates that certain taxes levied and collected by the Union must be compulsorily distributed between the Union and the States. Additionally, the Union provides Grants-in-aid to States under Article 275 (statutory grants) and Article 282 (discretionary grants).
This system connects directly to the Finance Commission, an institution established under Article 280 of the Constitution, which is appointed every five years by the President to recommend the principles for the distribution of tax revenues and grants-in-aid. The framework has changed significantly with the introduction of the Goods and Services Tax (GST) through the Constitution (One Hundred and First Amendment) Act, 2016. This amendment led to the omission of Article 268A (which dealt with service tax) and the insertion of Article 269A, which governs the levy and apportionment of Inter-State GST. Earlier, the Eightieth Amendment Act, 2000, had also altered the distribution by mandating the sharing of a percentage of central taxes with the states.