Centre-State Relations: legislative, administrative and financial

Part XI of the Constitution (Articles 245 to 263) governs how the Union and the States divide legislative and administrative power. Part XII (Articles 264 to 293) governs how they divide money. Together these two Parts are what Laxmikanth's "Centre-State Relations" chapter covers, and UPSC treats them as three testable dimensions: legislative relations (who can make which law, and about what), administrative relations (who directs whom, and who serves where), and financial relations (who levies which tax, who collects it, and who ends up with the money). This note covers all three, article by article. Where the Governor's own role comes up (assent to Bills, President's Rule), it is covered here only from the Centre-State angle; the office of Governor itself, including Article 356 in the Emergency context, has its own note on this site worth reading alongside this one.

This chapter's material overlaps with NCERT Class 11, Indian Constitution at Work, Chapter 7 (Federalism). This note goes further than that chapter's coverage.

Legislative relations (Articles 245 to 255)

Territorial extent. Article 245(1) lets Parliament make laws for the whole or any part of the territory of India, while a State Legislature can make laws only for the whole or any part of that State. Article 245(2) adds a specific, often-missed point: a law made by Parliament cannot be struck down merely because it has extra-territorial operation, meaning its effect reaches beyond India's borders. A State Legislature has no such protection; its laws are meant to operate within the State.

The three lists. Article 246 distributes subjects across the Seventh Schedule's three lists: the Union List (Parliament's exclusive domain), the State List (ordinarily the State Legislature's exclusive domain), and the Concurrent List (both can legislate). Article 246(4) adds that Parliament can legislate for any Union territory even on a State List matter, since a Union territory has no State Legislature of its own to claim that exclusivity.

Parliament legislating on a State subject: four real routes. The State List is not actually closed to Parliament. There are four distinct, precisely worded circumstances under which Parliament can step in, and UPSC's classic trap is testing whether a candidate can tell them apart:

• Article 249, national interest. If the Rajya Sabha passes a resolution supported by not less than two-thirds of the members present and voting, declaring it necessary or expedient in the national interest for Parliament to legislate on a State List matter, Parliament may do so for the whole or any part of India. The resolution stays in force for a period not exceeding one year at a time, renewable indefinitely by a fresh resolution passed the same way.
• Article 250, National Emergency. While a Proclamation of Emergency (Article 352) is in operation, Parliament can make laws on any State List matter for the whole or any part of India. A law made this way does not lapse the moment the Emergency ends; it continues to have effect for six months after the Proclamation ceases to operate, except as respects things already done or omitted under it.
• Article 252, State consent. If two or more State legislatures pass resolutions asking Parliament to regulate a State List matter by law, Parliament may pass an Act applying to those consenting States. Any other State can adopt it later by its own resolution. This is the one route the States themselves initiate, not Parliament or the Rajya Sabha.
• Article 253, international agreements. Parliament can make a law for the whole or any part of India, on any matter including a State List subject, to implement a treaty, agreement or convention with any country, or a decision made at an international conference, association or other body. This route needs no resolution or state consent; it flows directly from India's treaty obligations.

A fifth route sits outside Article 249 to 253 altogether: during President's Rule under Article 356, the power of the State Legislature is exercised by or under the authority of Parliament, so Parliament ends up legislating on the whole of the State List for that State until normal government is restored.

Governor's reservation of Bills and the President's options. Under Article 200, once a State Bill is passed, the Governor can assent, withhold assent, return it once (if it is not a Money Bill) for reconsideration, or reserve it for the President's consideration; the Governor must reserve it if the Bill would, in the Governor's opinion, endanger the position of the High Court. Under Article 201, the President then either assents or withholds assent; if the Bill is not a Money Bill, the President may direct the Governor to send it back to the State Legislature for reconsideration within six months, but is under no obligation to assent even if it is passed again. (The Governor's own appointment, discretion and immunities, plus the Sarkaria Commission's recommendation on how Governors should be chosen, are covered in the dedicated Governor note.)

Repugnancy on the Concurrent List (Article 254). When a State law on a Concurrent List matter conflicts with a Union law (or an existing law) on the same matter, the Union law prevails and the State law is void to the extent of the repugnancy. The one exception: if the State law was reserved for the President's consideration and received the President's assent, it prevails in that particular State, even over an earlier Union law. Parliament can still override it later by a fresh law that adds to, amends, varies or repeals the State law.

Administrative relations (Articles 256 to 263)

Union directions to a State. Article 256 obliges every State to exercise its executive power so as to ensure compliance with laws made by Parliament, and lets the Union give directions necessary for that purpose. Article 257 goes further: the Union can also direct a State on the construction and maintenance of communications declared to be of national or military importance, and on measures for the protection of railways within the State. Where such a direction costs the State money above its normal duties, the Union pays the extra cost, by agreement or, failing that, as an arbitrator appointed by the Chief Justice of India decides.

Delegation both ways. Article 258 lets the President, with a State government's consent, entrust Union executive functions to that State (or its officers). Article 258A, inserted by the Seventh Amendment, 1956, is the mirror image: a Governor, with the Union's consent, can entrust State executive functions to the Union.

All-India Services (Article 312). Using the same two-thirds Rajya Sabha mechanism as Article 249, Parliament can create one or more All-India Services common to the Union and the States. The Indian Administrative Service and the Indian Police Service are deemed to be services created under this article; the Indian Forest Service was added later, in 1966, using this same route. Members are recruited and appointed by the Union but serve the States, which is precisely why All-India Services sit in the administrative-relations chapter and not somewhere else: they are a Union-controlled instrument operating inside State administration.

Public Service Commissions across States (Article 315). Two or more States may agree to have a single, joint Public Service Commission instead of one each, provided each State's legislature passes a resolution to that effect; Parliament then provides for it by law.

Inter-State Council (Article 263). If it appears to the President that the public interest would be served, the President may by order establish a Council to inquire into and advise on disputes between States, investigate and discuss subjects of common interest to some or all States (or the Union and one or more States), and recommend better coordination of policy and action. This is a discretionary, "may establish" power, not an automatic body. In practice, the Inter-State Council was established on 28 May 1990, by Presidential order, after the Sarkaria Commission recommended it; it is chaired by the Prime Minister and includes the Chief Ministers of the States among its members.

Zonal Councils: a statutory body, not a constitutional one. This is where UPSC likes to trip up a candidate who has only half-read this chapter. Zonal Councils are not created by the Constitution at all. They were set up under Part III of the States Reorganisation Act, 1956, a plain Act of Parliament, as an advisory forum to smooth that year's linguistic reorganisation of States. There are five (Northern, Central, Eastern, Western and Southern), each chaired by the Union Home Minister, with member States' Chief Ministers rotating as Vice-Chairman. So the Inter-State Council rests on Article 263 itself, while Zonal Councils rest entirely on an ordinary statute; confusing the two is a genuinely common wrong-answer pattern.

Inter-State river water disputes (Article 262). Parliament may by law provide for adjudicating any dispute over the use, distribution or control of the waters of an inter-State river or river valley, and, notwithstanding anything else in the Constitution, may by law bar the Supreme Court and every other court from exercising jurisdiction over such a dispute. Parliament used this power in the Inter-State River Water Disputes Act, 1956, under which a dispute referred to a Tribunal is taken out of the ordinary courts' hands, including the Supreme Court's, for as long as it remains before that Tribunal.

Financial relations (Articles 268 to 293)

The Constitution splits taxing power three ways: some taxes are levied and collected entirely by the Union, some are levied by the Union but collected by the States, and some are levied and collected wholly by the States.

• Union levied, Union collected: most Union List taxes, such as corporation tax and customs duties, work this way, with the proceeds simply forming part of the Consolidated Fund of India unless a specific article says otherwise.
• Union levied, State collected (Article 268): certain stamp duties named in the Union List are levied by the Government of India but collected by the States (or, within Union territories, by the Union itself); the proceeds are assigned to the State where they are collected and never form part of the Consolidated Fund of India.
• Union levied and collected, but assigned to the States (Article 269): taxes on the inter-State sale or purchase of goods, and on the inter-State consignment of goods, fall here. Goods and Services Tax on inter-State supplies has its own dedicated provision, Article 269A, under which the Union levies and collects it and it is apportioned between the Union and the States on the recommendation of the GST Council.
• State levied, State collected: land revenue, State excise, and taxes on agricultural income are the standard examples; Article 276 also lets States tax professions, trades and employments (subject to a ceiling fixed by Parliament) without that counting as income tax.

Vertical devolution (Article 270). Most Union taxes and duties referred to in the Union List (barring the Article 268 duties, the Article 269/269A assigned taxes, any Article 271 surcharge, and cesses for specific purposes) are levied and collected by the Union but then distributed between the Union and the States, in the manner recommended by the Finance Commission. Article 271 is the exception on the Union's side: a surcharge Parliament adds to these duties and taxes goes wholly to the Consolidated Fund of India and is never shared.

The Finance Commission (Article 280). The President constitutes a Finance Commission within two years of the Constitution's commencement, and thereafter, in the Commission's own words on its constitutional basis, "at the expiration of every fifth year or earlier." It has a Chairman and four other members. Its core duties: recommend how the net proceeds of shareable taxes should be divided between the Union and the States, how the States' share should be allocated among themselves, the principles governing grants-in-aid under Article 275, and (since the 73rd and 74th Amendments) measures to supplement Panchayats' and Municipalities' resources. This makes it a periodic, quasi-judicial body, not a one-off one. The Fifteenth Finance Commission's recommendations covered 2021 to 2026; the Sixteenth, chaired by Dr Arvind Panagariya, has since reported, covering 2026 to 2031, proof this machinery keeps running on its five-year rhythm rather than being settled history. Every recommendation is laid before Parliament by the President with an explanatory memorandum on the action taken (Article 281).

Two very different kinds of grant. Article 275 grants are general purpose grants-in-aid, given to States Parliament determines need assistance, on principles the Finance Commission recommends (plus standing provisos for Scheduled Tribes' welfare and Scheduled Areas' administration). Article 282 grants are different: the Union or a State may make a grant for any public purpose, even outside its own normal legislative competence, with no Finance Commission involvement at all. Treating every Centre-to-State grant as Finance-Commission-recommended is another statement-based trap.

Borrowing (Articles 292 and 293). The Union borrows on the security of the Consolidated Fund of India, within limits Parliament fixes by law. A State borrows on the security of its own Consolidated Fund, within limits its Legislature fixes by law, and cannot raise a fresh loan without the Union's consent while an earlier Union loan, or a Union-guaranteed loan, remains outstanding.

The exam trap: routes into the State List, and which bodies are constitutional

Two confusions account for most of the wrong answers here, and both are statement-based rather than simple recall.

The first is mixing up Articles 249, 250, 252 and 253. A quick way to keep them straight: 249 needs a two-thirds Rajya Sabha resolution and is time-bound; 250 needs a National Emergency and outlasts it by six months; 252 needs the consenting States' own resolutions, not Parliament's or the Rajya Sabha's initiative; and 253 needs none of that machinery, since it flows straight from a treaty obligation. UPSC 2016 tested this distinction directly (which body's resolution, and by what majority, lets Parliament legislate on a State subject "in the national interest").

The second is assuming every body that coordinates Centre-State or inter-State affairs is a constitutional creation. It is not: the Inter-State Council rests on Article 263, established in 1990 following the Sarkaria Commission, while Zonal Councils rest entirely on the States Reorganisation Act, 1956. UPSC has also tested this chapter from the State List side directly, asking about prison administration (2023, a genuine State List subject under the old Prisons Act, 1894) and mining rights over minor minerals (2025, where the Union retains power to classify what counts as a "minor mineral" even though States grant the leases), both really questions about where the State List's line actually falls.

Closing note: three mechanisms, one general lean

Read together, these three chapters do bear out the "quasi-federal, strong unitary bias" character this site's Salient Features note describes in general terms: Parliament can reach into the State List through four routes, the Union can direct a State's executive and station its own recruited officers inside State administration, and vertical tax devolution runs through a Union-collected pool rather than States raising most of what they spend. But the value of this chapter is not the vague impression that "the Centre is stronger." It is knowing exactly which article does which job: 249 is not 250, Article 268 is not Article 269, and a body that merely coordinates is not automatically a body the Constitution itself created.

Quick revision points

• Legislative (Art 245 to 255): Parliament's laws can have extra-territorial operation; a State's cannot. Four routes onto the State List: 249 (Rajya Sabha, two-thirds, one year at a time), 250 (National Emergency, plus six months after), 252 (States' own consent, by resolution), 253 (international agreements, no resolution needed). 254: Union law beats State law on the Concurrent List, unless the State law had the President's prior assent.
• Administrative (Art 256 to 263): Union gives directions to States under 256/257; powers can be delegated either way (258, 258A). All-India Services (312) are Union-recruited but State-serving. The Inter-State Council (263) is constitutional, established 1990 after Sarkaria; Zonal Councils are statutory, from the States Reorganisation Act, 1956, not the Constitution. Inter-State river disputes (262) can be taken out of ordinary courts' hands by Parliament, and were, via the 1956 Act.
• Financial (Art 268 to 293): stamp duties (268) are Union-levied, State-collected; inter-State sale/consignment taxes (269) are Union-levied-and-collected but assigned to States; most shareable taxes are distributed under 270 on Finance Commission advice. The Finance Commission (280) is constituted roughly every five years by the President; 275 grants are Finance-Commission-recommended, 282 grants are for any public purpose at all, with no such requirement.

Once these article numbers and the four-routes distinction are genuinely fixed, practise the statement-based questions UPSC builds around them.