Article 271 provides provisions for the center to levy surcharges on certain taxes and duties. The entire proceed will go to the center. Article 271 is an exception to Article 269 and Article 270. The imposition and collection of the surcharge are also done by the Union and the State has no role to play in it.

The Topic of surcharges and cess is very important for the UPSC Exam.

What is a Surcharge?

• A surcharge is an extra fee, charge, or tax that is added to the cost of a product or service after the initial price has been quoted.
• Surcharges are frequently added to existing taxes and are not included in the advertised price of the good or service.
• The fee could indicate governments' need to raise funds for additional services, a hike to cover the expense of rising commodity prices, such as a fuel levy, or an additional fee on your Telephone bill for access to emergency services.
• In simple words, the surcharge is a tax levied on a tax.

Examples of a few Surcharges in India

• A Surcharge of 10% on the Income-tax amount is charged whose net income is between 50 lakhs and 1 crore.
• A surcharge is levied on the luxury and sin goods beyond the GST of 28%.

Surcharge on Certain Taxes and Duties for Purposes of the Centre - Constitutional Provisions

Article 271 has the following key elements:

• Parliament has the power to increase any duty or tax anytime by levying a surcharge except in the case of GST mentioned under Article 246A.
• All the proceeds obtained from the surcharges will be part of the consolidated fund of India.
• All the amount from such an increase in tax shall be retained by the parliament and it is not shared amongst the states.
• The Article has its basis to Section 137 and Section 136(1) of the Government of India Act, 1935.
• Further, no authority has the power to prevent the Parliament from imposing a surcharge.

Conclusion

The revenue from surcharges can be directed towards social welfare programs, infrastructure development, and other initiatives aimed at reducing regional disparities and promoting inclusive growth.

FAQs

MCQs

1. What does Article 271 of the Indian Constitution deal with?

A) Surcharge on certain taxes and duties
B) Fundamental Rights
C) States' revenue collection
D) Taxation powers of the President

2. A surcharge can be levied on which of the following taxes?

A) Income tax
B) Corporate tax
C) Customs duty
D) All of the above

3. What is the main purpose of imposing a surcharge under Article 271?

A) To reduce the tax burden on individuals
B) To provide additional revenue for the Centre
C) To increase states' share in taxes
D) To alter the basic tax structure

4. Which of the following is true regarding the surcharge imposed under Article 271?

A) It alters the structure of the original tax
B) It is a permanent feature of taxation
C) It is an additional charge on existing taxes for the Centre
D) It applies to state taxes

5. How does the surcharge affect the states’ share of revenue?

A) It reduces the share of revenue for the states
B) It has no impact on states’ share of revenue
C) It increases states’ share of revenue
D) It directly affects the financial independence of the states

GS Mains Questions and Model Answers

Q1: Explain the role of Article 271 in India’s fiscal policy and its impact on the Union Government's revenue.

Answer: Article 271 allows the Union Government to impose a surcharge on certain taxes for its own purposes. This additional revenue helps the Centre meet its budgetary and developmental needs. By leveraging surcharges, the government can generate funds without having to alter the tax structure fundamentally. This flexibility enables the government to address fiscal challenges effectively while ensuring that the existing tax framework remains intact. The surcharges are typically levied on taxes like income tax, corporate tax, and customs duties, and they help finance various government programs and services.

Q2: Discuss the relationship between the surcharge imposed under Article 271 and the central-state fiscal distribution in India.

Answer: Article 271 allows the central government to levy a surcharge on taxes like income tax and customs duties without affecting the distribution of tax revenues between the Centre and the states. While the states receive their share from the taxes collected, the surcharge is an additional revenue source that goes entirely to the Centre. This mechanism helps the Centre meet its fiscal requirements without altering the financial autonomy or revenue distribution system between the Centre and the states, which is outlined in Article 280 of the Constitution.

Q3: How does the imposition of surcharges under Article 271 reflect India's fiscal strategy in managing its economy?

Answer: The imposition of surcharges under Article 271 reflects a strategic fiscal approach that allows the Centre to generate additional funds for specific purposes, particularly in times of financial strain or when additional revenue is required for national development projects. The surcharge does not alter the fundamental tax structure but provides the government with flexibility in managing its budgetary requirements. This approach reflects India's ability to adapt its fiscal strategy to meet national needs without altering the balance of taxation power between the Centre and the states.

Previous Year Questions on Article 271

1. UPSC CSE Prelims 2020:

Question: Article 271 of the Indian Constitution allows the central government to impose which of the following?

A) Income tax
B) Surcharge on certain taxes for the purpose of the Centre
C) Agricultural taxes
D) Property taxes

Answer: (B)

Explanation: Article 271 provides the Union Government with the authority to impose a surcharge on certain taxes, specifically for its own purposes.

2. UPSC CSE Mains 2019 (GS Paper 2):

Question: Discuss the financial implications of the surcharge levied under Article 271 for the Centre and its impact on taxpayers.

Answer: The surcharge levied under Article 271 allows the Centre to collect additional revenue for specific purposes, such as infrastructure projects or budgetary requirements. While this increases the tax burden on taxpayers, the surcharge is generally targeted at higher-income groups or corporate taxes. The surcharge helps the government manage its fiscal policy effectively by providing an additional source of funds without altering the overall tax structure. However, the increase in the financial burden may affect individual and corporate taxpayers, depending on the scale of the surcharge.

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