Practice 50 Fiscal Federalism & Finance Commission multiple-choice questions with detailed answers and explanations. Ideal for RAS/RPSC exam preparation.
Q1. How much did Mumbai lose annually in tax revenue post-GST implementation?
Explanation
Mumbai lost approximately Rs 7,000 crore annually post-GST implementation, highlighting the impact on municipal fiscal autonomy.
Q2. The 14th Finance Commission (2015-20) recommended States' share in divisible pool as:
Explanation
The 14th Finance Commission (chaired by Y.V. Reddy) recommended 42% as States' share — a significant increase from the 32% recommended by the 13th FC. The 15th FC reduced it to 41%.
Q3. What is the net tax receipts estimate in Union Budget 2026-27?
Explanation
Net tax receipts estimated at Rs 28.7 lakh crore in Budget 2026-27.
Q4. India's tax-to-GDP ratio is approximately:
Explanation
India's gross tax-to-GDP ratio (Centre) is about 11-12%, lower than OECD average of ~34%. Including state taxes, it's about 17-18%. Budget 2025-26 aims to improve tax buoyancy through simplified compliance and widened base.
Q5. With reference to India public finance, consider the following pairs: (Scheme / Fund) - (Correct description) 1. UDAY Scheme - Restructuring of distribution companies (DISCOM) debt by states 2. National Calamity Contingency Fund - Replaced by NDRF under Disaster Management Act 2005 3. Revenue Deficit Grant - Recommended by Finance Commission to fill the gap between assessed revenue and expenditure of states 4. GST Compensation Cess - Collected for 5 years (2017-2022) to compensate states for GST revenue shortfall Which of the above pairs are CORRECTLY matched?
Explanation
All four pairs are correctly matched. (1) UDAY (Ujwal DISCOM Assurance Yojana, 2015) allowed state govts to take over 75% of DISCOM debt. (2) National Calamity Contingency Fund was replaced by NDRF under Disaster Management Act 2005. (3) Revenue Deficit Grants are provided to revenue-deficit states based on Finance Commission assessment. (4) GST Compensation Cess was levied for 5 years (June 2017 to June 2022) to compensate states guaranteed 14% annual revenue growth.
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Q6. Which of the following is NOT part of the divisible pool of central taxes that is shared with states?
Q7. The Goods and Services Tax (GST) Council has recommended how many rate slabs?
Q8. The 16th FC recommends states reduce fiscal deficit to what percentage of GSDP?
Q9. What was the gross GST revenue collected for December 2025 as reported on January 1, 2026?
Q10. What is the capital expenditure target in Union Budget 2026-27?
Q11. With reference to the 16th Finance Commission (2026–31), consider the following statements: 1. The Commission retained the states' share in the divisible pool at 41%, unchanged from the 15th Finance Commission. 2. 'Contribution to GDP' was introduced as a new criterion for horizontal devolution for the first time. 3. Rajasthan's share increased from 6.03% to 6.13% under the new formula. 4. The declining divisible pool as a share of gross tax revenues is attributable to growing cesses and surcharges. Which of the statements is/are CORRECT?
Q12. Which commission recommends the share of central taxes to be devolved to states including Rajasthan?
Q13. With reference to the Urban Challenge Fund (UCF) approved by the Union Cabinet on February 16, 2026, consider the following: 1. The total Central Assistance under UCF is ₹1 lakh crore. 2. The scheme requires at least 50% of project financing to come from market sources. 3. UCF operates under the Ministry of Finance. 4. A Credit Repayment Guarantee Scheme of ₹5,000 crore is embedded within UCF for smaller ULBs. Which of the above statements are CORRECT?
Q14. Which state topped the NITI Aayog Fiscal Health Index 2026 for the second consecutive year?
Q15. The Vivad Se Vishwas Scheme 2.0 announced in Union Budget 2024-25 deals with resolution of:
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