Lists of the matters, in respect of which the power of making laws for peace, order and good government and the functions pertaining to the administration of those laws shall fall within tile spheres respectively of the Centre and the Units, shall be embodied in the Constitution Act. The detailed drawing up of these lists should be left to the Constitution-making Body. The Committee however, would recommend that the following principles, among others, should guide the Constitution-making Body in the distribution of powers and functions between the Centre and the Units:-
(a) The powers and functions assigned to the Centre should be as small in number as possible provided that they shall in any case include
(i) matters of common interest to India as a whole, such as Foreign Affairs, Defence Relations with Indian states, Inter-unit communications, Commerce, Customs, Currency, Posts and Telegraphs.
(ii) settlement of inter-unit disputes;
(iii) co-ordination where necessary of the legislation and administration of different Units;
(iv) such other matters or action as may be required for ensuring the safety and tranquillity of India or any part thereof or for the maintenance of the political integrity and economic unity, of India or for dealing with any emergencies.
(b) While all matters not assigned to the Centre exclusively or concurrently must be declared to fan within the sphere of the Units, a list of these should, for greater certainty be given in the Constitution Act with the rider that all residuary powers – those not included in either of the two lists – shall vest in the Units.
(c) All customs barriers between one Unit and another shall be abolished and there shall be free trade within the Union, provided that, where the abolition of existing customs barriers affects prejudicially the finances of a Unit it shall be entitled to adequate compensation out of the revenues of the Union.