Part XII - Finance • Article

Article 279 Simplified: Calculation of “net proceeds”, etc

Article 279 defines 'Net Proceeds' for all tax-sharing calculations. It states that net proceeds are the gross tax collected minus the cost of collection (salaries, admin expenses, audits). Crucially, this amount must be verified and certified by the Comptroller and Auditor-General (CAG) of India, whose certificate is final and legally binding.

Official Text

(1) In the foregoing provisions of this Chapter, “net proceeds” means in relation to any tax or duty the proceeds thereof reduced by the cost of collection, and for the purposes of those provisions the net proceeds of any tax or duty, or of any part of any tax or duty, in or attributable to any area shall be ascertained and certified by the Comptroller and Auditor-General of India, whose certificate shall be final. (2) Subject as aforesaid, and to any other express provision of this Chapter, a law made by Parliament or an order of the President may, in any case where under this Part the proceeds of any duty or tax are, or may be, assigned to any State, provide for the manner in which the proceeds are to be calculated, for the time from or at which and the manner in which any payments are to be made, for the making of adjustments between one financial year and another, and for any other incidental or ancillary matters.

Simple Meaning

Explain Like Ten

To find the 'net proceeds' of a tax, you take all the tax money collected and subtract the cost of collecting it (like salaries of officers). The head auditor of India (CAG) checks the math, and their signature is final.

Student Mode

Article 279 defines 'net proceeds' as the gross revenue of any tax or duty minus the administrative cost of its collection. Clause (1) mandates that the Comptroller and Auditor-General of India (CAG) must ascertain and certify these net proceeds, and this certification is constitutionally declared to be final and unchallengeable.

Example

If the Union Government collects ₹10,000 crores in corporate taxes and incurs ₹150 crores in collection costs, the CAG certifies the 'net proceeds' as ₹9,850 crores, which then serves as the basis for the states' share.

Key Takeaway

Net proceeds are gross tax minus collection costs, certified finally and authoritatively by the Comptroller and Auditor-General of India.

FAQs

What is the cost of collection in Article 279?

It includes all administrative expenditures incurred in collecting the tax, such as staff salaries, offices, IT systems, and enforcement costs.

Why is the CAG's certificate final?

To prevent disputes between the Union and States regarding the actual pool of tax revenue available for distribution. The CAG is an independent constitutional authority whose audit ensures neutrality.

Quiz

Who is the constitutional authority that certifies the 'net proceeds' of a tax under Article 279?

Answer: The Comptroller and Auditor-General (CAG)

According to Article 279, 'net proceeds' equals gross proceeds minus what?

Answer: Cost of collection