Mains · GS Paper III · 9 questions

Government budgeting

Every question UPSC has set on this line of the GS Paper III syllabus, newest first — with an approach for each.

Asked in 7 of 11 years

UPSC syllabus (verbatim): “Government Budgeting.” Sub-topics in the detailed syllabus →

2025

GS Paper III 2025 · Q11

15 marks · 250 words X-Ray · Core #2

Explain how the Fiscal Health Index (FHI) can be used as a tool for assessing the fiscal performance of states in India. In what way would it encourage the states to adopt prudent and sustainable fiscal policies?

Approach · directive: “explain / in what way”

What it asks · Explain how NITI Aayog’s FHI measures State finances and how its rankings can push States towards prudent, sustainable fiscal policy.

It asks 2 things — answer each

Explain how the Fiscal Health Index can be used as a tool for assessing the fiscal performance of States
Explain in what way it would encourage States to adopt prudent and sustainable fiscal policies

Open with · NITI Aayog's Fiscal Health Index (January 2025) scores 18 major States on five sub-indices; Odisha topped it with 67.8, ahead of Chhattisgarh and Goa, at a time when States' outstanding liabilities (28.5% of GDP, end-March 2024) still exceed the pre-pandemic level.

Cover

Design: quality of expenditure, revenue mobilisation, fiscal prudence, debt index and debt sustainability — capturing both annual flows and accumulated debt.
Diagnosis: shows each State’s weak spot — high committed spending, low own-tax effort, rising debt — so reform can be targeted.
Benchmarking: the 2025 edition ranked Odisha first (67.8), followed by Chhattisgarh and Goa; a second edition followed in 2026.
Peer pressure: public rankings build competitive federalism and reputational incentives; lenders and rating agencies read the signal.
Policy leverage: can inform Finance Commission and Union decisions on performance-linked grants and extra borrowing limits tied to reforms.
Nudges: capital expenditure over populist transfers, better tax and non-tax collection, disclosure of off-budget borrowings and contingent liabilities.
Limits: data lags, uniform weights, special-category constraints and dependence on Union transfers; it must not become a tool to squeeze welfare.

Close with · Used as a mirror, the FHI can anchor the RBI's call for a transparent, time-bound glide path for debt consolidation at the tier of government that spends most of India's public money, making State fiscal prudence a shared pillar of Viksit Bharat @2047.

Add value (verified)

NITI Aayog’s FHI 2025 assesses 18 major States on five sub-indices.PIB, NITI Aayog — NITI Aayog launches the Fiscal Health Index 2025 (24 January 2025) ↗“The report provides a comprehensive assessment of the fiscal health of 18 major States, based on five key sub-indices: Quality of Expenditure, Revenue Mobilisation, Fiscal Prudence, Debt Index, and Debt Sustainability”
FHI 2025: Odisha topped with 67.8, followed by Chhattisgarh (55.2) and Goa (53.6).PIB, NITI Aayog — NITI Aayog launches the Fiscal Health Index 2025 (24 January 2025) ↗“With a cumulative score of 67.8, Odisha tops the ranking in fiscal health among 18 major States, followed by Chhattisgarh and Goa with scores of 55.2 and 53.6, respectively.”
FHI 2026 (second edition): North-Eastern and Himalayan States ranked separately; most of the 18 major States recorded moderated scores in 2023-24.PIB, NITI Aayog — NITI Aayog launches second annual edition of the Fiscal Health Index (2026) ↗“To account for structural differences across regions, the Northeastern and Himalayan states have been evaluated and ranked separately from the major states. The analysis reveals significant variation in fiscal outcomes across states. Among the 18 major States, most recorded moderated FHI scores in 2023-24 compared to the previous year, reflecting evolving fiscal pressures.”
RBI State Finances 2024-25: States' outstanding liabilities fell from 31.0% of GDP (end-March 2021) to 28.5% (end-March 2024), still above the pre-pandemic 25.3% (end-March 2019).RBI press release, State Finances: A Study of Budgets of 2024-25 (19 December 2024) ↗“States' total outstanding liabilities declined from 31.0 per cent of GDP at end-March 2021 to 28.5 per cent at end-March 2024 but remain above the pre-pandemic level (25.3 per cent at end-March 2019).”
RBI State Finances 2024-25: States' capital expenditure rose from 2.4% of GDP (2021-22) to 2.8% (2023-24), budgeted at 3.1% in 2024-25.RBI press release, State Finances: A Study of Budgets of 2024-25 (19 December 2024) ↗“The improvement in the quality of expenditure was sustained, with capital expenditure rising from 2.4 per cent of GDP in 2021-22 to 2.8 per cent in 2023-24 and budgeted at 3.1 per cent of GDP in 2024-25.”
RBI (2024) recommends a risk-based fiscal framework, a medium-term expenditure framework, a time-bound glide path for debt consolidation and disclosure of off-budget borrowings and guarantees.RBI press release, State Finances: A Study of Budgets of 2024-25 (19 December 2024) ↗“State government finances would benefit from the adoption of a risk-based fiscal framework with provisions for counter-cyclical fiscal policy actions; a prudent medium-term expenditure framework; a clear, transparent and time-bound glide path for debt consolidation; and enhanced data dissemination and communication policies, including on reporting of outstanding liabilities, off-budget borrowings and guarantees.”

Question: UPSC's CS (Main) 2025, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 369words · Minimalist IAS

NITI Aayog's Fiscal Health Index (January 2025) scores 18 major States on five sub-indices; Odisha topped it with 67.8, ahead of Chhattisgarh (55.2) and Goa (53.6). It arrives when States' outstanding liabilities, 28.5% of GDP at end-March 2024, still exceed the pre-pandemic 25.3% (RBI, State Finances 2024-25).

How the FHI assesses the fiscal performance of States

Five sub-indices: quality of expenditure, revenue mobilisation, fiscal prudence, debt index and debt sustainability, so annual flows and the debt stock are both scored.
Diagnosis, not just rank: each sub-index exposes a State's weak spot: committed spending on salaries, pensions and interest, low own-tax effort, or debt rising faster than revenue.
Common yardstick: the Union, the Finance Commission, lenders and citizens read every State the same way; the 2026 edition ranks the North-Eastern and Himalayan States separately for fairness.
Trend tracking: the second edition found most major States' scores moderating in 2023-24, an early warning that a single budget would not show.

Sub-index	Healthy sign	Warning sign
Quality of expenditure	Rising capital outlay (States: 2.8% of GDP, 2023-24)	Subsidies crowding out capex
Revenue mobilisation	Growing own-tax share	Dependence on Union transfers
Debt sustainability	Debt falling against GSDP	Off-budget borrowing, guarantees

The full answer goes on to cover

How it encourages prudent and sustainable fiscal policies
Limits to keep in view

Read the full model answer (369 words) →

Prepared by Minimalist IAS to the answer standard of Shivam Singh (mentor, 7 years) · facts checked against official sources (how we verify) · updated 3 Oct 2026. UPSC publishes no model answers: compare your structure and coverage with this, then write your own.

GS Paper II 2025 · Q14

15 marks · 250 words X-Ray · Core #2

Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?

Approach · directive: “examine / how far”

What it asks · Trace how Centre–State financial relations changed from the planning era to the present, and assess the effect of recent reforms (NITI Aayog, higher devolution, GST, cesses, borrowing rules) on fiscal federalism.

It asks 2 things — answer each

Examine: the evolving pattern of Centre–State financial relations from the planning era to the present
How far: assess the impact of recent reforms — NITI Aayog, higher devolution, GST, cesses, borrowing rules — on fiscal federalism

Open with · A paradox in data: the 15th Finance Commission kept devolution at 41 per cent, yet unshared cesses and surcharges were over 19.9 per cent of gross tax receipts in 2018-19.

Cover

Planning era: Finance Commission (Article 280) and Planning Commission plan assistance by the Gadgil formula (1969); Article 282 grants and centrally sponsored schemes.
Borrowing leash: Article 293(3) requires Union consent for an indebted State to borrow.
Reforms: NITI Aayog replaced the Planning Commission (2015); devolution 32 to 42 per cent (14th FC), 41 per cent (15th FC).
GST (101st Amendment, 2016): pooled sovereignty, compensation ended 2022; Budget 2025-26: ₹1.5 lakh crore 50-year interest-free capex loans.
Impact: gains in untied transfers; a shrinking pool from cesses; lost tax and borrowing autonomy, Kerala's suit; cooperative in form, centralising in substance.
Way forward: share or cap cesses, revive GST consensus, rule-bound transfers under the Sixteenth Finance Commission.

Close with · NITI Aayog's own premise that 'strong States make a strong nation': shareable, rule-bound transfers are the test of cooperative federalism.

Add value (verified)

The 15th Finance Commission recommended keeping vertical devolution at 41 per cent, the same as in its 2020-21 report.Report of the 15th Finance Commission (2021-26), Vol I — Finance Commission of India ↗“we recommend maintaining the vertical devolution at 41 per cent – the same as in our report for 2020-21.”
15th Finance Commission: cesses and surcharges made up over 19.9 per cent of gross tax receipts in 2018-19, of which 4.6 per cent was GST Compensation Cess.Report of the 15th Finance Commission (2021-26), Vol I — Finance Commission of India ↗“Table 3.8 shows the trend of cesses and surcharges, which constituted over 19.9 per cent of gross tax receipts in 2018-19, of which 4.6 per cent is on account of GST Compensation Cess.”
Article 293(3): a State may not raise a loan without the Union's consent while any loan from the Union remains outstanding.The Constitution of India (as on 1 May 2024) - Legislative Department, Article 293(3) ↗“A State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government”
Budget 2025-26: an outlay of ₹1.5 lakh crore for 50-year interest-free loans to States for capital expenditure and incentives for reforms.Budget Speech 2025-26 — Union Budget, Government of India ↗“An outlay of ` 1.5 lakh crore is proposed for the 50-year interest free loans to states for capital expenditure and incentives for reforms.”
NITI Aayog's objectives include cooperative federalism, recognising that strong States make a strong nation.PIB: Government constitutes NITI Aayog (objectives) ↗“To foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis, recognizing that strong States make a strong nation.”

Question: UPSC's CS (Main) 2025, GS Paper II — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 349words · Minimalist IAS

The 15th Finance Commission kept the States' share of the divisible pool at 41 per cent. Yet cesses and surcharges, which States do not share, made up over 19.9 per cent of gross tax receipts in 2018-19. That gap captures how Centre–State finance has evolved: more devolution on paper, more central leverage in practice.

The planning-era pattern

Two channels: the Finance Commission (Article 280) gave statutory devolution; the Planning Commission gave plan assistance, from 1969 by the Gadgil formula.
Discretion: Article 282 grants and centrally sponsored schemes tied State budgets to central priorities.
Borrowing leash: under Article 293(3), a State still owing the Centre cannot borrow without its consent.

The full answer goes on to cover

Recent reforms
How far reforms have changed fiscal federalism
Way forward

With 1 timeline you can reproduce in the exam.

Read the full model answer (349 words) →

2021

GS Paper III 2021 · Q2

10 marks · 150 words

Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets.

Approach · directive: “distinguish / explain”

What it asks · Distinguish the Revenue Budget from the Capital Budget on the basis of what each does to assets and liabilities, and explain the receipts and expenditure that make up each.

It asks 2 things — answer each

Distinguish the Capital Budget from the Revenue Budget: the basis of the division (effect on assets and liabilities, recurrence) and the deficit it reveals
Explain the components of each: revenue receipts and revenue expenditure; capital receipts and capital expenditure

Open with · Article 112 requires the Annual Financial Statement to show revenue expenditure separately from other expenditure; hence the Union Budget has a Revenue Budget and a Capital Budget, each with its own receipts and spending.

Cover

Basis: revenue items recur and neither create assets nor reduce liabilities; capital items do. Article 112 requires revenue expenditure to be shown separately.
Revenue deficit (revenue expenditure minus revenue receipts) shows borrowing used for consumption; BE 2021-22 put it at 5.1% of GDP.
Revenue receipts: tax revenue (income tax, corporation tax, GST, customs, Union excise) and non-tax revenue (interest, dividends, fees, grants).
Revenue expenditure: running of departments, interest, subsidies, salaries and pensions; all grants to States count here even when they create assets.
Capital receipts: debt receipts (market loans, Treasury Bills, external loans) and non-debt receipts (recovery of loans, disinvestment).
Capital expenditure: land, buildings, machinery, equipment, investment in shares, loans and advances to States and PSEs; BE 2021-22 raised it 34.5% to Rs 5.54 lakh crore.

Close with · Budget 2021-22 raised capital expenditure 34.5% to Rs 5.54 lakh crore 'to boost economic growth by investing in infrastructure': the split exists so that borrowing builds assets while the revenue account moves towards balance.

Add value (verified)

The Key to Budget Documents defines the Revenue Budget as the government's revenue receipts (tax and non-tax) together with the expenditure met from them.Key to Budget Documents, Budget 2021-22, Ministry of Finance (para 3(iv)) ↗“The Revenue Budget consists of the revenue receipts of the Government (Tax revenues and other Non-Tax revenues) and the expenditure met from these revenues. Tax revenues comprise proceeds of taxes and other duties levied by the Union.”
The same document defines the Capital Budget as capital receipts plus capital payments, and states that all grants to States are revenue expenditure even where they create capital assets.Key to Budget Documents, Budget 2021-22, Ministry of Finance (para 3(iv)-(v)) ↗“All grants given to the State Governments/Union Territories and other parties are also treated as revenue expenditure even though some of the grants may be used for creation of capital assets. (v) Capital receipts and capital payments together constitute the Capital Budget.”
Budget at a Glance 2021-22 ties the 34.5% rise in capital expenditure to the government's commitment to growth through infrastructure.Budget at a Glance, Union Budget 2021-22, Ministry of Finance ↗“Budget 2021-22 reflects firm commitment of the Government to boost economic growth by investing in infrastructure development. This is substantiated by increase in capital expenditure by 34.5% (1,42,151 crore) over BE 2020-21.”
Budget at a Glance 2021-22 puts the revenue deficit at Rs 11,40,576 crore (5.1% of GDP) and the fiscal deficit at 6.8% of GDP in BE 2021-22.Budget at a Glance, Union Budget 2021-22, Ministry of Finance (deficit statement) ↗“14. Revenue Deficit (10-1) 666545 609219 1455989 1140576 (3.3) (2.7) (7.5) (5.1) 15. Effective Revenue Deficit 480904 402719 1225613 921464 (14-12) (2.4) (1.8) (6.3) (4.1) 16. Fiscal Deficit 933651 796337 1848655 1506812 [9-(1+5+6)] (4.6) (3.5) (9.5) (6.8)”
PIB's Budget 2021-22 summary records about Rs 5.5 lakh crore of capital expenditure in BE 2021-22, an increase of 34.5%.PIB: Summary of Union Budget 2021-22, 1 February 2021 ↗“Rs. 5.5 lakh crore as capital expenditure, an increase of 34.5% to give required push to economy”

Question: UPSC's CS (Main) 2021, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 222words · Minimalist IAS

Article 112 requires the Annual Financial Statement to show revenue expenditure separately from other expenditure; hence the Union Budget has a Revenue Budget and a Capital Budget, each with its own receipts and spending.

How the two Budgets differ

Test of assets and liabilities: revenue items recur and neither create an asset nor reduce a liability; capital items change the government's assets or liabilities.
Deficit signal: the revenue deficit shows borrowing spent on consumption; BE 2021-22 put it at 5.1% of GDP.

Budget	Receipts	Expenditure
Revenue	Taxes, interest, dividends, fees	Salaries, pensions, interest, subsidies
Capital	Borrowings, loan recovery, disinvestment	Assets, equity, loans to States

The full answer goes on to cover

Components of the Revenue Budget
Components of the Capital Budget

Read the full model answer (222 words) →

2020

GS Paper III 2020 · Q12

15 marks · 250 words X-Ray · Core #2

Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions?

Approach · directive: “explain / how”

What it asks · Explain why states were promised compensation when GST replaced their own taxes, and how the pandemic drained the fund and pitted the Centre against the states.

It asks 3 things — answer each

Explain the rationale behind the GST (Compensation to States) Act, 2017
Explain how COVID-19 hit the GST compensation fund
Show the new federal tensions this created, and the way out

Open with · Section 18 of the Constitution (101st Amendment) Act, 2016 required Parliament to compensate States for revenue lost from GST for five years; the GST (Compensation to States) Act, 2017 gave it effect, and the pandemic turned this guarantee into a test of cooperative federalism.

Cover

Rationale: States surrendered their taxes and GST accrues to the consuming State; 14% growth over the 2015-16 base guaranteed for five years, funded by a compensation cess.
Price of consent: Article 279A gives the Centre one-third of the weighted vote and every Council decision needs a three-fourths majority.
COVID-19: the 2020-21 shortfall far exceeded the cess pool; only about Rs 97,000 crore of it was attributed to GST implementation (41st Council, August 2020).
Tensions: the 'Act of God' stand, two borrowing options, States' demand that the Centre borrow; resolved by special-window loans of Rs 1.10 and Rs 1.59 lakh crore, with the cess continued to repay them.
Way forward: rule-based revenue protection, buoyancy, and the dispute mechanism that Article 279A(11) requires the Council to establish.

Close with · A guarantee honoured in spirit, transparent cess accounts and a working dispute mechanism under Article 279A(11) will keep the GST Council the model of cooperative federalism it was designed to be.

Add value (verified)

The Ministry of Finance states the guarantee in its own words: 14% annual growth over the 2015-16 base year, with any shortfall compensated.GST compensation to States for loss of revenue arising on account of implementation of GST for a period of five years, Ministry of Finance, PIB (19 July 2022) ↗“During transition period, the States’ revenues are protected at 14% growth rate per annum over the base year revenue (2015-16). Accordingly, the States are being compensated for any shortfall against their protected revenue.”
The Centre resolved the 2020-21 shortfall by borrowing Rs 1.10 lakh crore through a special window set up in October 2020, on behalf of the states, and passing it on as back-to-back loans.100 percent of the estimated GST compensation shortfall of Rs.1.10 Lakh crore released, Ministry of Finance, PIB (March 2021) ↗“The Government of India had set up a special borrowing window in October, 2020 to meet the estimated shortfall of Rs.1.10 Lakh crore in revenue arising on account of implementation of GST. The borrowings are being done through this window by the Government of India on behalf of the States and UTs.”
Section 18 of the Constitution (101st Amendment) Act, 2016 obliges Parliament to compensate States for GST revenue loss for five years from GST's implementation (Ministry of Finance, Parliament reply).PIB, Ministry of Finance: Payment of GST compensation to States in times of COVID-19 pandemic (Parliament reply) ↗“as per Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years from the date of implementation of GST.”
Article 279A(9): GST Council decisions need three-fourths of the weighted votes; the Centre's vote carries one-third weightage and all States together two-thirds.The Constitution of India (as on 1 May 2024), Article 279A(9) - Legislative Department ↗“Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely:— (a) the vote of the Central Government shall have a weightage of one-third of the total votes cast”
Borrowing options after the 41st GST Council (August 2020): the shortfall attributed to GST implementation, about Rs 97,000 crore, to be borrowed under a Special Window coordinated by the Finance Ministry.PIB annexure, Ministry of Finance, August 2020: GST compensation options communicated to States after the 41st GST Council meeting ↗“The shortfall arising out of GST implementation (calculated at Rs. 97,000 crores approximately) will be borrowed by States through issue of debt under a Special Window coordinated by the Ministry of Finance.”
The same annexure: the compensation cess continues after the transition period until all arrears are paid, with interest and principal on the special-window borrowing as the first charges on it.PIB annexure, Ministry of Finance, August 2020: GST compensation options ↗“The Compensation Cess will be continued after the transition period until such time as all arrears of compensation for the transition period are paid to the States. The first charge on the Compensation Cess each year would be the interest payable; the second charge would be the principal repayment.”
The Centre borrowed and released Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to States (Ministry of Finance, 31 May 2022).PIB, Ministry of Finance, 31 May 2022: Centre Clears Entire GST Compensation Due Till Date ↗“In order to meet the resource gap of the States due to short release of compensation, Centre has borrowed and released Rs.1.1 lakh crore in 2020-21 and Rs.1.59 lakh crore in 2021-22 as back-to-back loan to meet a part of the shortfall in cess collection.”

Question: UPSC's CS (Main) 2020, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 373words · Minimalist IAS

Section 18 of the Constitution (101st Amendment) Act, 2016 required Parliament to compensate States for revenue lost from GST for five years; the GST (Compensation to States) Act, 2017 gave it effect. The pandemic turned this fiscal guarantee into a test of cooperative federalism.

Rationale behind the Compensation Act

Loss of tax autonomy: States surrendered VAT, entry tax and other levies; GST accrues to the consuming State, so manufacturing States feared losses.
Assured growth path: every State's revenue is protected at 14% annual growth over its 2015-16 base for five years from July 2017.
Dedicated funding: a compensation cess on luxury and demerit goods flows into a Compensation Fund, independent of the Union budget.
Price of consent: the guarantee won States over in the GST Council (Article 279A), where the Centre holds one-third of the weighted vote and decisions need three-fourths.

The full answer goes on to cover

How COVID-19 hit the compensation fund
New federal tensions
Way forward

With 1 timeline you can reproduce in the exam.

Read the full model answer (373 words) →

2019

GS Paper III 2019 · Q1

10 marks · 150 words

Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.

Approach · directive: “enumerate / comment”

What it asks · List the central and state indirect taxes that GST replaced, then comment on what the tax has meant for revenue of the Centre and the States since July 2017.

It asks 2 things — answer each

Enumerate the central and state indirect taxes subsumed in GST
Comment on the revenue implications of GST since July 2017, for the Centre and the States

Open with · GST, in force from 1 July 2017, folded a web of central and state levies into one destination-based tax; its revenue story since then is one of a widening base and a thinning rate.

Cover

Central taxes subsumed: central excise and additional excise duties, service tax, CVD, SAD, central cesses and surcharges.
State taxes subsumed: VAT, central sales tax, purchase tax, luxury tax, entry tax, entertainment tax (except local bodies), taxes on advertisements, lotteries, betting and gambling.
Kept outside: basic customs duty, alcohol for human consumption, stamp and electricity duties; petroleum products until the GST Council decides.
Wider base: registered taxpayers rose from 60 lakh to about 1.51 crore; gross collections reached a record Rs 22.08 lakh crore in 2024-25 (PIB).
Thinning rate: the effective weighted average GST rate fell from 14.4% (2017) to 11.6% (2019) against a 15.3% revenue-neutral rate (GST Council, 2019).
States: 14% guaranteed growth for five years, funded by the compensation cess, protected budgets but delayed payments strained trust.
Way forward: the 56th GST Council (September 2025) moved to two slabs, 5% and 18%, with 40% for sin and luxury goods.

Close with · A GST that grows with the economy rather than with its rates is the fiscal spine of One Nation, One Tax, and of Viksit Bharat @2047, shared fairly between the Centre and the States.

Add value (verified)

CBIC's own list of the state taxes subsumed under GST can be used to check that an enumeration is complete; the same page lists the central taxes.Know About GST, Central Board of Indirect Taxes and Customs (cbic-gst.gov.in) ↗“State taxes that would be subsumed under the GST are: State VAT Central Sales Tax Luxury Tax Entry Tax (all forms) Entertainment and Amusement Tax (except when levied by the local bodies) Taxes on advertisements Purchase Tax”
PIB (1 July 2025, eight years of GST): gross GST collections reached a record Rs 22.08 lakh crore in 2024-25, 9.4% higher than the previous year, averaging Rs 1.84 lakh crore a month.PIB backgrounder: Eight Years of GST (2025) ↗“In 2024–25, GST recorded its highest-ever gross collection of ₹ 22.08 lakh crore, reflecting a year-on-year growth of 9.4 percent. The average monthly collection stood at ₹ 1.84 lakh crore.”
PIB (2025): the number of registered GST taxpayers grew from 60 lakh at launch to around 1.51 crore, and average tax rates came down.PIB backgrounder: Eight Years of GST (2025) ↗“With the removal of multiple taxes and improved compliance, the average tax rates have come down. The number of registered taxpayers has grown from 60 lakh to around 1.51 crore.”
GST Council newsletter (October 2019): its chart of the weighted average (effective) GST rate shows 14.4% in May 2017 falling to 11.6% by July-September 2019, against the 15.3% revenue-neutral rate; the Arvind Subramanian committee (2015) had recommended an RNR of 15-15.5%.GST Council newsletter, October 2019 ↗“15.3 14.4 12.6 12.2 11.8 11.6 11.6 Subramanian Comm. Rec. May - 17 Nov - 17 Jan - 18 Jul - 18 Dec - 18 July and Sep. 19 Weighted Average (Effective) GST Rate Trend of weighted average GST Rate vis-à-vis Revenue Neutral Rate (RNR)”
PIB (September 2025): the 56th GST Council reduced the four slabs (5%, 12%, 18%, 28%) to two main rates, 5% and 18%, with a 40% special rate for sin and luxury goods, effective 22 September 2025.PIB: Next-Gen GST overhaul (September 2025) ↗“In a historic move to simplify the Goods and Services Tax(GST), GST Council in its 56th meeting has reduced the GST structure from four slabs (5%, 12%, 18%, 28%) to two main rates—5% (merit rate) and 18% (standard rate) along with a 40% special rate for sin/luxury goods. These changes come into effect from September 22, 2025.”

Question: UPSC's CS (Main) 2019, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 225words · Minimalist IAS

GST, in force from 1 July 2017, folded many central and state levies into one destination-based tax on supply. Its revenue story since then: a widening base and a thinning rate.

Indirect taxes subsumed in GST

Level	Taxes subsumed
Central	Central excise and additional excise, service tax, CVD, SAD, central cesses and surcharges
State	VAT, central sales tax, purchase, luxury, entry and entertainment taxes; taxes on advertisements, lotteries, betting and gambling
Kept out	Basic customs duty, alcohol, stamp and electricity duties; petroleum until the GST Council decides

The full answer goes on to cover

Revenue implications since July 2017
Way forward

Read the full model answer (225 words) →

GS Paper III 2019 · Q12

15 marks · 250 words

The public expenditure management is a challenge to the Government of India in the context of budget making during the post-liberalization period. Clarify it.

Approach · directive: “clarify”

What it asks · Explain why managing public spending is hard for the Union Government when framing budgets after 1991: rigid commitments, deficit targets, subsidy pressure, leakages and weak outcome tracking, and the reforms that address them.

It asks 2 things — answer each

Clarify why managing public expenditure is a challenge in post-liberalisation budget-making: rigid commitments, deficit rules, subsidies, quality and transparency of spending, federal pressures
Note the reforms that address these challenges

Open with · In Budget 2026-27 interest payments of Rs 14.04 lakh crore take nearly 40% of the Centre's revenue receipts and 20 paise of every rupee spent; since 1991 the budget's task has shifted from expanding the State to disciplining it.

Cover

Rigid commitments: interest, salaries, pensions, defence and subsidies pre-empt most revenue, leaving little for capital and social spending.
Deficit rules under strain: the FRBM Act, 2003 set targets, yet the fiscal deficit was 4.4% of GDP in 2025-26 (RE) after pauses for shocks.
Subsidy pressure and hidden borrowing: food, fertiliser and fuel bills swell; NSSF loans to FCI understated the deficit until Budget 2021-22 ended them.
Federal squeeze: the Fourteenth Finance Commission's 42% devolution and GST compensation narrow the Centre's room; revenue spending crowds out capital.
Reforms: N.K. Singh committee's 60% debt target (40 Centre, 20 States); Budget 2025-26's path to Central debt of about 50±1% of GDP by 2031.
Reforms: Plan/non-plan merger in 2017-18 with outcome budgets; DBT across 320 schemes with estimated gains of Rs 5.14 lakh crore; PFMS tracking.

Close with · Commitments are rigid, revenue uncertain and outcomes hard to see; holding Central debt to the 50±1% path over the 16th Finance Commission cycle while shifting rupees from interest and subsidy to capital assets is how each rupee can count.

Add value (verified)

Budget at a Glance 2026-27: interest payments Rs 14,03,972 crore (BE) against revenue receipts of Rs 35,33,150 crore; interest takes 20 paise of every rupee of expenditure; fiscal deficit 4.4% of GDP in 2025-26 (RE) and 4.3% in 2026-27 (BE).Union Budget 2026-27 — Budget at a Glance ↗“11. Interest Payments 1115575 1276338 1274338 1403972”
The Government's debt anchor: Central Government debt on a declining path to about 50±1% of GDP by 31 March 2031, the last year of the 16th Finance Commission cycle.Union Budget 2025-26 — Medium Term Fiscal Policy cum Fiscal Policy Strategy Statement (FRBM) ↗“the Central Government debt is on declining path to attain a debt to GDP level of about 50±1 per cent by 31st March 2031 (the last year of the 16th Finance Commission cycle)”
Budget 2021-22 discontinued the NSSF loan to FCI for food subsidy, bringing the food-subsidy arrears on budget.Union Budget 2021-22 — Speech of the Finance Minister, 1 Feb 2021 ↗“I propose to discontinue the NSSF Loan to FCI for Food Subsidy and accordingly Budget Provisions have been made in RE 2020-21 and BE 2021-22.”
The N.K. Singh FRBM Review Committee recommended debt as the primary fiscal target: 60% of GDP, with 40% for the Centre and 20% for the States, to be reached by 2023.PRS Legislative Research — FRBM Review Committee Report Summary (2017) ↗“A debt to GDP ratio of 60% should be targeted with a 40% limit for the centre and 20% limit for the states.”
DBT Bharat portal: 320 schemes of 56 ministries run on Direct Benefit Transfer, with cumulative estimated gains of Rs 5,14,201.92 crore.DBT Bharat portal, Government of India (dashboard) ↗“NO. OF SCHEMES 320 More details MINISTRIES 56 More details ESTIMATED GAINS ₹ 5,14,201.92 Cr”

Question: UPSC's CS (Main) 2019, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 380words · Minimalist IAS

On the latest figures, Budget 2026-27 puts interest payments at Rs 14.04 lakh crore: nearly 40% of the Centre's revenue receipts (Rs 35.33 lakh crore) and 20 paise of every rupee spent. Since 1991 the budget's task has shifted from expanding the State to disciplining it while still funding development.

Why public expenditure management is a challenge after liberalisation

Rigid commitments: interest, salaries, pensions, defence and subsidies pre-empt most revenue, leaving little discretionary room for capital and social spending.
Deficit rules under strain: the FRBM Act, 2003 set deficit and debt targets, yet the fiscal deficit stood at 4.4% of GDP in 2025-26 (RE) after repeated pauses for shocks and revenue shortfalls.
Subsidy pressure: food, fertiliser and fuel subsidies swell with world prices and electoral politics, while leakages persist despite targeting.
Hidden borrowing: off-budget loans from the NSSF to FCI for food subsidy understated the true deficit until Budget 2021-22 discontinued them.
Federal squeeze: the Fourteenth Finance Commission's 42% devolution, GST compensation and rising social-sector expectations narrow the Centre's fiscal room.
Quality: revenue spending crowds out capital outlay, projects overrun cost and time, and outputs are counted more than outcomes.

Pressure	Evidence	Reform
Debt and interest	20 paise of every rupee on interest (Budget 2026-27)	Debt anchor of about 50±1% of GDP by 2031
Leakage	Diversion in subsidy delivery	DBT: estimated gains of Rs 5.14 lakh crore
Opaque accounts	NSSF loans to FCI	Brought on budget in 2021-22

The full answer goes on to cover

Reforms that address the challenge

Read the full model answer (380 words) →

2018

GS Paper III 2018 · Q2

10 marks · 150 words

Comment on the important changes introduced in respect of the Long-term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in the Union Budget for 2018–2019.

Approach · directive: “comment”

What it asks · Set out what Budget 2018-19 changed in the taxation of long-term capital gains on equity and of income distributed by equity-oriented mutual funds, and comment on the reasons and the likely effect.

It asks 2 things — answer each

Set out the changes: the 10 per cent tax on long-term capital gains from listed equity above ₹1 lakh with grandfathering, and the 10 per cent tax on income distributed by equity-oriented mutual funds
Comment on the rationale and the likely effects, with a balanced view and later developments

Open with · Till 2018 long-term gains on listed equity were tax-free; exempt gains of about ₹3.67 lakh crore in assessment year 2017-18 (Budget speech) showed a bias towards financial assets that the Budget ended.

Cover

Context: exempt long-term gains of about ₹3.67 lakh crore in assessment year 2017-18 (Budget speech 2018-19) created a bias towards financial assets.
LTCG: 10 per cent on gains above ₹1 lakh on listed equity and equity-oriented fund units held over a year, without indexation; short-term stays 15 per cent.
Grandfathering: gains up to 31 January 2018 protected, so only later appreciation is taxed.
DDT: 10 per cent on income distributed by equity-oriented mutual funds, paid at fund level, to level dividend and growth options.
Rationale: wider base, parity across assets, about ₹20,000 crore extra revenue in the first year.
Concerns: market fall on announcement, lower post-tax returns for small investors, reduced payouts, frequent rule changes.
Since then: Budget 2020-21 abolished DDT, taxing dividends in recipients' hands; Budget 2024-25 set LTCG at 12.5 per cent with a ₹1.25 lakh exemption.

Close with · Taxing equity like other assets is settled policy, as the single 12.5 per cent rate of 2024-25 shows; rate stability and simple compliance will keep household savings flowing into the capital market.

Add value (verified)

The Budget speech gave the design of the LTCG change: a 10 per cent tax on gains above ₹1 lakh without indexation, grandfathered to 31 January 2018; the same passage adds a 10 per cent tax on income distributed by equity-oriented mutual funds.Union Budget 2018-19: Budget Speech of the Finance Minister, Ministry of Finance (para 155) ↗“I propose to tax such long term capital gains exceeding ₹1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31st January, 2018 will be grandfathered.”
Budget 2020-21 removed the Dividend Distribution Tax and adopted the classical system under which dividends are taxed only in the hands of recipients at their applicable rate.Union Budget 2020-21, Budget Speech, para 116 (Dividend Distribution Tax) ↗“I propose to remove the DDT and adopt the classical system of dividend taxation under which the companies would not be required to pay DDT. The dividend shall be taxed only in the hands of the recipients at their applicable rate.”
Budget 2024-25 set long-term capital gains on all financial and non-financial assets at 12.5 per cent and raised the exemption limit on certain financial assets to ₹1.25 lakh a year.Union Budget 2024-25, Budget Speech, para 143 (rationalisation of capital gains) ↗“Long term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent. For the benefit of the lower and middle-income classes, I propose to increase the limit of exemption of capital gains on certain financial assets to ₹ 1.25 lakh per year.”

Question: UPSC's CS (Main) 2018, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 221words · Minimalist IAS

Till 2018 long-term gains on listed equity were tax-free; exempt gains of about ₹3.67 lakh crore in assessment year 2017-18 (Budget speech) showed a bias towards financial assets that the Budget ended.

Changes in the Long-term Capital Gains Tax

10% tax: gains above ₹1 lakh a year on listed equity and equity-oriented fund units held over a year, without indexation; short-term gains stayed at 15%.
Grandfathering: gains up to 31 January 2018 stayed exempt, so only later appreciation is taxed.

The full answer goes on to cover

Changes in the Dividend Distribution Tax
Comment: rationale and effects

With 1 table you can reproduce in the exam.

Read the full model answer (221 words) →

2017

GS Paper III 2017 · Q11

15 marks · 250 words

One of the intended objectives of the Union Budget 2017-18 is to ‘transform, energise and clean India’. Analyse the measures proposed in the Budget 2017-18 to achieve the objective.

Approach · directive: “analyse”

What it asks · Go through the Budget 2017-18's proposals under its 'Transform, Energise and Clean India' agenda and assess how each set of measures serves the aim.

It asks 2 things — answer each

Analyse the Budget 2017-18 measures under each strand of the objective: Transform, Energise and Clean India
Assess how far these measures, within a prudent fiscal frame, could achieve the objective

Open with · The Union Budget 2017-18, presented on 1 February 2017 as the first Budget with the Railway Budget merged into it, grouped its proposals under ten themes and one slogan, 'Transform, Energise and Clean India' (TEC India).

Cover

Transform (farmers and rural India): a higher farm credit target, a micro-irrigation fund with NABARD, a record MGNREGA allocation and rural housing and roads.
Transform (youth and the poor): skill centres and education reform, health and social sector outlay, and Mission Antyodaya to make gram panchayats poverty-free.
Energise (infrastructure): more for roads, ports and railways, a rail safety fund, infrastructure status for affordable housing and a merged Railway Budget.
Energise (economy): a push to digital payments, abolition of the Foreign Investment Promotion Board and easier approvals for investment.
Clean (money and politics): curbs on large cash transactions, a cap on anonymous cash donations to political parties and the announcement of electoral bonds.
Prudent finance: a fiscal deficit target of 3.2 per cent of GDP for 2017-18, and an earlier Budget date with a single, merged exercise.
Assessment: the measures target growth, jobs and transparency; results depend on implementation, revenue mobilisation and whether spending reaches the intended groups.

Close with · TEC India set a direction later Budgets carried into the capital-expenditure push; its lasting lesson is that transformation is measured in outcomes, delivered credit, durable assets and transparent funding, on the road to Viksit Bharat @2047.

Add value (verified)

Budget 2017-18 speech: MGNREGA allocation raised from Rs 38,500 crore (2016-17) to Rs 48,000 crore, the highest ever.Union Budget 2017-18 — Budget Speech of Arun Jaitley, 1 February 2017 (para 36) ↗“48,000 crores in 2017-18. This is the highest ever allocation for MGNREGA. The initiative to geo-tag all MGNREGA assets and putting them in public domain has established greater transparency”
Budget 2017-18 speech: Mission Antyodaya to bring one crore households out of poverty and make 50,000 gram panchayats poverty-free by 2019.Union Budget 2017-18 — Budget Speech of Arun Jaitley, 1 February 2017 (para 33) ↗“we will undertake a Mission Antyodaya to bring one crore households out of poverty and to make 50,000 gram panchayats poverty free by 2019, the 150th birth anniversary of Gandhiji”
Budget 2017-18 speech: agricultural credit target for 2017-18 fixed at a record Rs 10 lakh crore, with special efforts for under-served areas such as the eastern States.Union Budget 2017-18 — Budget Speech, 1 February 2017 (para 26) ↗“The target for agricultural credit in 2017-18 has been fixed at a record level of ` 10 lakh crores. We will take special efforts to ensure adequate flow of credit to the under serviced areas, the Eastern Sta”
Budget 2017-18 speech: total allocation for infrastructure development in 2017-18 of Rs 3,96,135 crore.Union Budget 2017-18 — Budget Speech, 1 February 2017 (para 94) ↗“The total allocation for infrastructure development in 2017-18 stands at `3,96,135 crores.”
Budget 2017-18 speech: cash donation a political party can receive capped at Rs 2,000 from one person, on the Election Commission's suggestion; electoral bonds proposed via an RBI Act amendment.Union Budget 2017-18 — Budget Speech, 1 February 2017 (political funding paras) ↗“In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be `2000/- from one person.”
Budget 2017-18 speech: fiscal deficit for 2017-18 pegged at 3.2% of GDP with 3% the following year; the FRBM Review Committee favoured general government debt-to-GDP of 60% by 2023.Union Budget 2017-18 — Budget Speech, 1 February 2017 (fiscal management paras) ↗“I have pegged the fiscal deficit for 2017-18 at 3.2% of GDP and remain committed to achieve 3% in the following year.”
Supreme Court, Association for Democratic Reforms v Union of India (15 February 2024): the Electoral Bond Scheme and the related amendments held violative of Article 19(1)(a) and unconstitutional.Association for Democratic Reforms v Union of India, 2024 INSC 113 — Supreme Court of India judgment PDF ↗“are violative of Article 19(1)(a) and unconstitutional”

Question: UPSC's CS (Main) 2017, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 371words · Minimalist IAS

The Union Budget 2017-18, the first with the Railway Budget merged into it, arranged its proposals under ten themes and one slogan: 'Transform, Energise and Clean India' (TEC India). It tried to combine rural demand, public investment and cleaner money within a fiscal glide path.

Transform: farmers, villages and the poor

Farm credit: a record target of Rs 10 lakh crore, with special effort for eastern States, and a NABARD Micro Irrigation Fund for 'per drop more crop'.
Rural works: MGNREGA raised to Rs 48,000 crore, its highest ever; PMGSY roads at 133 km a day in 2016-17 against 73 km during 2011-14.
Poverty exit: Mission Antyodaya aimed to lift one crore households out of poverty and make 50,000 gram panchayats poverty-free by 2019.

The full answer goes on to cover

Energise: infrastructure and enterprise
Clean: black money and political funding
How far the measures could achieve the objective

With 1 table you can reproduce in the exam.

Read the full model answer (371 words) →

2016

GS Paper III 2016 · Q2

12½ marks · 200 words X-Ray · Core #41

Women empowerment in India needs gender budgeting. What are the requirements and status of gender budgeting in the Indian context?

Approach · directive: “what”

What it asks · Explain why empowering women needs gender-responsive budgets, list what is required to make gender budgeting work, and describe where India stands.

It asks 3 things — answer each

Explain why women's empowerment in India needs gender budgeting
State the requirements for gender budgeting to work in the Indian context
Describe the status of gender budgeting in India

Open with · Gender budgeting is not a separate budget for women but a gender lens on the whole budget; the Union Gender Budget Statement for 2025-26 adds up to about Rs 4.49 lakh crore across its three parts.

Cover

Need: women carry unpaid care, earn less and use public services less, so gender-neutral spending serves men more; female LFPR (15+) was 41.7% against 78.8% for men (PLFS 2023-24).
Need: Article 15(3) permits special provision for women and children; budgets are where that provision becomes real.
Requirements: sex-disaggregated data, gender analysis of schemes before allocation, outcome indicators and gender audits after spending.
Requirements: trained officials and working gender budgeting cells, women's participation through gram sabhas and panchayats, and a gender lens on taxes and user charges.
Status, Union: a Gender Budget Statement since 2005-06: Part A (100% for women), Part B (30-99%), and Part C (below 30%); 2025-26 BE: Rs 1,05,535 crore, Rs 3,26,672 crore and Rs 16,821 crore.
Status, coverage: 49 ministries and departments in 2025-26 (38 in 2024-25); many States publish their own statements.
Gaps: allocations rather than outcomes, a few large schemes dominate Part B, local bodies outside, treated as a formality by many departments.
Way forward: link the statement to gender audits and outcome budgets, extend to all ministries and local bodies, publish sex-disaggregated data.

Close with · Gender budgeting is the fiscal arm of women-led development: judged by outcomes for women rather than the size of the statement, it turns Nari Shakti into service delivery.

Add value (verified)

Union Budget 2025-26, Expenditure Profile Statement 13 (Gender Budget): Part A is schemes with 100% provision for women and girls, Part B 30-99%, Part C below 30%. ↗“Part A reflects schemes with 100% provision for women and girls, Part B reflects schemes with 30-99% allocations for women and girls and Part C reflects schemes with allocations for women and girls below 30% of the provision”
Statement 13, 2025-26 BE totals: Part A Rs 1,05,535.40 crore, Part B Rs 3,26,672.00 crore, Part C Rs 16,821.28 crore (together about Rs 4.49 lakh crore); PM-Kisan is listed in Part C. ↗“PART A Total : 71912.99 112396.15 80733.35 105535.40”
Statement 13: Part B total for 2025-26 BE is Rs 3,26,672 crore. ↗“PART B Total : 297446.34 199762.29 281104.56 326672.00”
Constitution of India, Article 15(3): the State may make special provision for women and children. ↗“Nothing in this article shall prevent the State from making any special provision for women and children”
PLFS 2023-24 (MoSPI press note): LFPR in usual status for persons aged 15 and above was 78.8% for males and 41.7% for females. ↗“Labour Force Participation Rate (LFPR) in usual status (ps+ss) for persons of age 15 years and above was 60.1% during July 2023 - June 2024. The same for male and female was 78.8% and 41.7% respectively”

Question: UPSC's CS (Main) 2016, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer· 297words · Minimalist IAS

Gender budgeting is not a separate budget for women; it is a gender lens on the whole budget, asking whether spending reaches women fairly. The Union Gender Budget Statement for 2025-26 totals about Rs 4.49 lakh crore (Statement 13). Gender-neutral spending is rarely gender-equal; empowerment therefore needs it.

Why women's empowerment needs gender budgeting

Unequal starting point: women carry unpaid care, earn less and use services less, so uniform spending serves men more.
Constitutional mandate: Article 15(3) permits 'any special provision for women and children'; the budget makes it real.
Participation gap: female LFPR (15+) was 41.7 per cent against 78.8 per cent for men (PLFS 2023-24); childcare, safety and skills need deliberate money.

The full answer goes on to cover

Requirements of gender budgeting
Status of gender budgeting in India
Way forward

With 1 table you can reproduce in the exam.

Read the full model answer (297 words) →

The Syllabus X-Ray of this syllabus line

1 of its 7 sub-topics is High

0 Core · 1 High · 3 Steady · 3 Rare

HighGST & fiscal federalism · 4 questions

The X-Ray ranks all 928 sub-topics of the UPSC syllabus by what UPSC has asked since 2016. The 78 Mains Core sub-topics are behind 66% of Mains questions.

See the whole X-Ray →

The same ground in Prelims

Budget, taxation & public financePrelims PYQs

From the UPSC Blog

GST Council (Article 279A): Composition, Voting and Cooperative Federalism — UPSC Notes6 Oct 2026

More of GS Paper III

Quick answers

How many UPSC Mains questions have been asked on Government budgeting?

9 questions in GS Paper III from 2016 to 2026, asked in 7 of 11 years, most recently in 2025. Each is above, newest first, with the demand, an approach and a model answer.

What does the UPSC syllabus say on Government budgeting?

The GS Paper III syllabus line reads, in UPSC's words: “Government Budgeting.”

Where are the GS Paper III PYQs topic-wise as a free PDF?

The GS Paper III syllabus-wise PDF — every question since 2016 under its syllabus line, with an approach — is a free download on the Vault's downloads page (one sign-up, no cost).

Free · Daily Updates Join Minimalist IAS on Telegram or WhatsApp A PYQ every morning, the Daily Brief and the Sunday quiz. Free, no sign-up. Join Telegram Join on WhatsApp →