Constitution of India

Article 269A: Levy and collection of goods and services tax in course of inter-State trade or commerce

Part XII — Finance, Property, Contracts and Suits (Chapter I — Distribution of Revenues between the Union and the States)

Clause (1) — with Explanation

WHAT IT SAYS: 1. GST on inter-State supplies shall be levied and collected by the Government of India. 2. Such tax shall be apportioned between Union and States as Parliament provides by law. 3. Apportionment must be on the recommendations of the GST Council. 4. Explanation: Imports into India are deemed to be inter-State supply. WHAT IT MEANS: 1. Only the Centre (not States) collects Integrated GST (IGST) on cross-border and inter-State transactions. 2. Revenue is shared — not retained solely by the Centre. 3. Import of goods/services attracts IGST, not just customs duty. KEY DOCTRINE: 1. Destination-Based Consumption Tax — revenue accrues to the consuming State, not the producing State. 2. Cooperative Federalism — GST Council recommends, but Parliament legislates.

Clause (2)

WHAT IT SAYS: 1. The amount apportioned to a State under Clause (1) shall NOT form part of the Consolidated Fund of India. WHAT IT MEANS: 1. The State's share of IGST goes directly to that State. 2. It bypasses the Consolidated Fund of India — no further parliamentary appropriation needed. 3. Ensures fiscal autonomy of States over their share. KEY DOCTRINE: 1. Direct Assignment Principle — State's share is credited to State's Consolidated Fund, not routed through CFI.

Clause (3)

WHAT IT SAYS: 1. If IGST collected under Clause (1) is used to pay State GST (under Article 246A), that amount shall NOT form part of the Consolidated Fund of India. WHAT IT MEANS: 1. Addresses cross-utilisation of taxes. 2. When IGST is set off against SGST liability, the amount does not enter the CFI. 3. Prevents double-counting in Union's accounts. KEY DOCTRINE: 1. Input Tax Credit (ITC) Mechanism — ensures seamless credit flow between IGST and SGST without distorting Union revenue accounts.

Clause (4)

WHAT IT SAYS: 1. If SGST collected under Article 246A is used to pay IGST under Clause (1), that amount shall NOT form part of the Consolidated Fund of the State. WHAT IT MEANS: 1. Mirror provision of Clause (3) — applies to States. 2. When SGST is set off against IGST liability, the amount does not enter the State's Consolidated Fund. 3. Maintains accounting integrity on both sides. KEY DOCTRINE: 1. Symmetrical Cross-Utilisation — ensures ITC works both ways (Centre ↔ State) without fiscal distortion.

Clause (5)

WHAT IT SAYS: 1. Parliament may, by law, formulate principles for determining the place of supply. 2. Parliament may also determine when a supply takes place in the course of inter-State trade or commerce. WHAT IT MEANS: 1. Parliament has exclusive power to define 'place of supply' rules. 2. This determines which State gets the IGST revenue (destination State). 3. Operationalised through the IGST Act, 2017 (Sections 7–13). KEY DOCTRINE: 1. Place of Supply Rules — critical for destination-based taxation; determines taxing jurisdiction.

Constitutional Inspiration

SOURCE(S): 1. Canada — Dual GST Model (Federal GST + Provincial HST/PST, introduced 1991) Original provision: Federal government levies GST at 5%; provinces levy separate Provincial Sales Tax (PST) or opt into Harmonized Sales Tax (HST). What India kept: The dual-structure concept — Centre levies CGST/IGST, States levy SGST simultaneously. 2. Australia — A New Tax System (Goods and Services Tax) Act, 1999 Original provision: Single federal GST at 10%, collected by Australian Tax Office and distributed to States via Commonwealth Grants Commission. What India kept: Central collection of inter-State GST (IGST) with distribution to States based on destination. 3. France — First country to implement VAT/GST in 1954 Original provision: Multi-stage value-added tax replacing cascading turnover taxes. What India kept: The core VAT principle — tax on value addition at each stage, with input tax credit. INDIA'S SPECIFIC ADAPTATIONS: 1. Constitutional GST Council (Art. 279A) — No other country has a constitutionally mandated federal-state body for GST governance; needed because India's States had independent taxing powers. 2. Multiple Tax Slabs (5%, 12%, 18%, 28%) — Unlike single-rate systems of Australia/NZ; adopted to protect lower-income consumers and accommodate India's diverse economy. 3. IGST Mechanism for inter-State trade — Unlike Canada where provinces levy their own tax, India centralised inter-State levy to prevent tax wars and ensure seamless national market. 4. Exclusion of petroleum, alcohol, electricity — Reflects States' dependence on these revenue sources; a political compromise to secure ratification by State legislatures.

Constituent Assembly Debate

NOT APPLICABLE — Article 269A was NOT part of the original Constitution of 1950. It was inserted by the Constitution (101st Amendment) Act, 2016, Section 9. Hence, no Constituent Assembly Debate (CAD) records exist for this article. PARLIAMENTARY HISTORY: 1. The 122nd Constitution Amendment Bill was introduced in Lok Sabha on 19 December 2014. 2. Passed by Lok Sabha on 6 May 2015. 3. Passed by Rajya Sabha on 3 August 2016 (after Select Committee recommendations). 4. Ratified by more than 50% of State Legislatures (16 out of 29 States). 5. Presidential assent received on 8 September 2016. 6. Article 269A notified w.e.f. 16 September 2016. KEY PARLIAMENTARY SPEAKERS: 1. Arun Jaitley (Finance Minister) — Championed GST as 'One Nation, One Tax'; argued it would boost GDP by 1-2%. 2. P. Chidambaram (Congress) — Supported GST in principle; demanded constitutional cap on GST rate. 3. Select Committee (Chairman: Bhupender Yadav) — Recommended inclusion of compensation clause for States and deletion of proposed 1% additional tax.

Landmark Judgments

LANDMARK JUDGMENTS: 1. Union of India v. Mohit Minerals Pvt. Ltd. (2022) — SC held that GST Council recommendations are persuasive, not binding on Union or State legislatures; upheld cooperative federalism under Articles 246A, 269A, and 279A. 2. Skill Lotto Solutions Pvt. Ltd. v. Union of India (2020) — SC upheld constitutionality of GST on lotteries, betting, and gambling; affirmed Parliament's plenary power under Article 246A to define 'goods' inclusively. 3. Union of India v. VKC Footsteps India Pvt. Ltd. (2021) — SC held that Article 246A provides Parliament and State legislatures with 'simultaneous' (not concurrent) power to legislate on GST; emphasised need for harmonised GST structure. 4. State of West Bengal v. Kesoram Industries Ltd. (2004) — Pre-GST case that laid foundational principles on inter-State trade taxation and distribution of fiscal powers under the Constitution. NOTABLE DISSENTS: 1. No formal dissent in Mohit Minerals (2022) — all three judges (CJI Chandrachud, Surya Kant, Vikram Nath) were unanimous, but the ruling sparked intense policy debate on whether non-binding recommendations could destabilise the GST regime. SCHOLARS & JURISTS: 1. Vijay Kelkar (Chairman, 13th Finance Commission Task Force on GST) — Recommended destination-based dual GST; his 2004 report laid the intellectual foundation for Article 269A. 2. Arvind Subramanian (Chief Economic Adviser, 2014-18) — Advocated a Revenue Neutral Rate of 15-15.5% and warned that multiple slabs would complicate the GST architecture.