Which of the following is/are true?

1) A state government can borrow from outside India.

2) State and local authorities can tax the corporations or the companies created by the Union government.

a. Only 1

b. Only 2

c. Both 1 and 2

d. Neither 1 nor 2

ANSWER: Only 2

Explanation:

Provisions for borrowingby Centre and the States -

The Central government can borrow either within India or outside.

The security provided would be the Consolidated Fund of India.

It can even give guarantees on basis of the Fund.

Both these rights need to be within the limits fixed by the Parliament.

A state government can borrow within India only.

The security provided would be the Consolidated Fund of the State.

Even state government can give guarantees.

Both these rights need to be within the limits fixed by the concerned state legislature.

State government cannot raise loans from outside India.

The Central government can give loans to any state.

It can also give guarantees for loans raised by any state.

Any amount needed for the purpose of making these loans are charged on the Consolidated Fund of India.

A state cannot raise any loan without the permission of the Centre, if there is still any part of a loan made to the state by the Centre outstanding.

They raise any loan without the permission of the Centre if for previous any loan a guarantee has been given by the Centre.

Tax Immunities for Centre and state properties -

The property of Centre is exempted from all taxes imposed by a state.

They are exempted from tax of any authority within a state like municipalities, Panchayats, etc.

But, the Parliament can remove this ban.

The property may be used for sovereign(like armed forces) or commercial purposes.

State and local authorities can tax the corporations or the companies created by the Union government because they are a separate legal entity.

The property and income of a state is exempted from Central taxation but corporations and companies of a state are not.

If Parliament provides the Centre can tax the commercial operations of a state.

The property and income of local authorities located within a state are not exempted from the Central taxation.

Immunity to a state in respect of taxation by union does not extend to the duties of customs or excise.