Article 269A of Indian Constitution: Levy and collection of goods and services tax in course of Inter-State trade or commerce
Article 269A of Indian Constitution
Intro: Article 269A of the Indian Constitution, a cornerstone of the Goods and Services Tax (GST) framework, revolutionized India’s tax structure by introducing a uniform tax regime. This pivotal amendment aimed to streamline the complex web of taxes, eliminate the cascading effect, and enhance the efficiency of tax collection, fostering a more integrated and economically unified nation. Here, we delve into the intricacies of Article 269A, its impact, and its role in reshaping India’s fiscal landscape.
Original Text of Article 269A of Indian Constitution:
(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.
Explanation. —For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India.
(4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State.
(5) Parliament may, by law, formulate the principles for determining the place of supply and when a supply of goods, services, or both takes place in the course of inter-State trade or commerce.
Commentary on Article 269A of Indian Constitution:
GST is the indirect tax imposed on the supply of goods and services. GST is a path-breaking indirect tax reform that will create a common national market by removing inter-state trade barriers.
It subsumed multiple indirect taxes, including VAT, excise duty, service tax, luxury tax, entertainment tax, purchase tax, sales tax, etc., imposed by the central and State governments.
GST was first introduced in France in the year 1954. Countries like Canada and Brazil have adopted a dual model of GST. India has adopted a dual GST Model, which will be imposed concurrently by the Union and states.
Types of GST:
- State GST (SGST): It is levied by the state government on intra-state goods and services transactions. It is collected by the states on all goods and services within the states.
- Central GST (CGST): it is levied on the central government’s intra-state goods and services transactions.
- Integrated GST (IGST): it is levied on inter-state goods and services The revenue is shared between both the central and the state governments.
- Union Territory (UGST): it is levied by the Union territory on the goods and services transaction within the Union territory.
Case of Interstate GST
What is the need for a separate Inter-state GST/Integrated GST?
GST is a destination-based tax. Therefore, the tax must go to the State where the purchase is made, even when the tax is collected by the Seller. To direct the collected tax to the destination state government, this tax is collected fully by the Government of India, and later, half of this is transferred to the destination state.
For example, suppose a Person from the “destination state” buys an item from a seller from the “Selling state”. The payment is made to the Seller along with the GST amount. The Seller should not transfer this payment to the “Selling State” since GST is a destination-based tax. How do we resolve this problem?
Under the provisions of Article 269A, the Union government collects this tax and transfers half of it to the destination state.
Now read Clause 1, 2 and 3:
- Thus, The Goods and Services Tax on supplies in the course of inter-state trade is levied and collected by the Centre. However, this tax is distributed between the Centre and the States in accordance with the rules set forth by Parliament based on the GST Council’s recommendations.
- This amount does not form part of the consolidated fund of India so that it can be shared with the “destination state”.
Case of Input credit (269A(3) and (4))
- Also, the tax collected by the Union (269A(3)) or a State (269A(3)) for inter-state commerce that has been used for payment of the tax imposed under clause 1 (i.e. used as input credit) shall not form part of the consolidated fund of the Union/State.
- This enables the input credit mechanism to function efficiently.
Power to make GST law for Inter-state Goods
Article 269A Clause (5) empowers the Parliament to formulate the principles for determining the place of supply and when a supply of goods, services, or both takes place in the course of inter-state trade or commerce.
List of Amendments:
| Amendment | Description |
|
101st Amendment Act, 2016 |
Introduction of Goods and Services Tax, which subsumed several taxes (Central excise tax, service tax, central sales tax, etc.) within itself and conferred concurrent powers to the states and Centre to impose taxes on Goods and Services. It intended to remove the cascading effect (tax on tax) of taxes and provide for a common national market for goods and services. The Parliament alone has the authority to enact laws regarding the goods and services tax where the supply of goods or services occurs during inter-state trade or commerce. |
For further Reference:
Read the Constitution of India.
Read the Centre-state relations article.
