Constitution of India
Article 277: Savings
Part XII — Finance, Property, Contracts and Suits (Chapter I — Finance: Distribution of Revenues between the Union and the States)
Article 277 (Single, undivided article — no sub-clauses)
WHAT IT SAYS: Pre-Constitution taxes, duties, cesses, or fees lawfully levied by any State government, municipality, or local body may continue to be levied and applied to the same purposes — even if those levies now fall under the Union List — until Parliament enacts a contrary law. WHAT IT MEANS: 1. States and local bodies retain their pre-1950 revenue streams without disruption. 2. Union List assignment of a tax subject does NOT automatically extinguish a pre-existing State/local levy. 3. Only Parliament (not the Executive) can discontinue such pre-existing levies — and only 'by law'. 4. The levy must be applied to the SAME purpose as before; purpose cannot be changed. 5. The tax must have been ACTUALLY and LAWFULLY levied immediately before 26 January 1950 — mere authority to levy is not enough. KEY DOCTRINE: Doctrine of Fiscal Continuity / Savings — transitional protection ensuring no fiscal vacuum at the commencement of the Constitution.
Constitutional Inspiration
SOURCE(S): 1. Government of India Act, 1935 — Section 143(2) Original provision: Section 143(2) allowed provinces and local bodies to continue levying taxes that fell within the exclusive Federal List, provided they were actually being levied before the Act commenced. What India kept: The same transitional savings mechanism — pre-existing local levies survive redistribution of taxing powers. INDIA'S SPECIFIC ADAPTATIONS: 1. Broader coverage — Article 277 covers not just provinces but also municipalities, district boards, and other local bodies, reflecting India's multi-tiered governance. 2. Parliamentary override clause — Unlike Section 143 (which had no explicit 'by law' requirement), Article 277 specifically requires Parliament to act 'by law' to discontinue such levies, ensuring legislative deliberation. 3. Purpose-binding — The levy must continue to be applied to the SAME purposes, preventing diversion of funds by local bodies after the constitutional transition. IF ORIGINAL INDIAN CONTRIBUTION: The framers felt this was essential to prevent immediate fiscal collapse of States and local bodies upon the drastic redistribution of taxation powers between Union and State Lists under the Seventh Schedule.
Constituent Assembly Debate
DEBATED ON: 9 August 1949 (CAD Volume IX) DRAFT ARTICLE NUMBER: Draft Article 257 KEY SPEAKERS: 1. Dr. B.R. Ambedkar (Chairman, Drafting Committee) — Moved a minor amendment to add the words 'by law' at the end of Draft Article 257, clarifying that only a Parliamentary enactment (not executive order) can override pre-existing levies. 2. Shri K. Santhanam (Madras) — Highlighted the importance of this provision in maintaining financial stability for local bodies during the constitutional transition. MAJOR DISAGREEMENTS: 1. None — The article was adopted with no debate. The amendment to add 'by law' was accepted without opposition. FINAL OUTCOME: Draft Article 257 was adopted with the minor drafting amendment ('by law' added); no substantive changes were made to the original provision. AMBEDKAR'S KEY QUOTE: Dr. Ambedkar emphasized the need for a transitional mechanism to preserve local revenues during the shift to a constitutional framework.
Landmark Judgments
LANDMARK JUDGMENTS: 1. Town Municipal Committee, Amravati v. Ramchandra Vasudeo Chimote (1964) — Article 277 only saves taxes ACTUALLY being levied before the Constitution; new taxes or modifications post-1950 are not protected. 2. Hyderabad Chemical & Pharmaceutical Works Ltd. v. State of Andhra Pradesh (1965) — A pre-Constitution fee for supervising alcohol usage in medicine manufacturing was saved as a 'cess' under Article 277, even though Parliament had legislated on medicine production. 3. M/s S.R. Tewari v. District Board, Agra (1964) — The Court recognised the continued authority of local bodies to levy and collect taxes lawfully imposed before the Constitution, unless specifically altered by Parliament. 4. State of West Bengal v. Kesoram Industries Ltd. (2004) — Discussed the scope of Article 277 in the context of fiscal federalism and State taxation powers; reiterated that local and State taxation powers continue until Parliament legislates otherwise. NOTABLE DISSENTS (if any): 1. None specifically recorded on Article 277 interpretation in the above cases. SCHOLARS & JURISTS: 1. D.D. Basu — Described Article 277 as a critical transitional safeguard ensuring fiscal continuity for sub-national governments during the constitutional changeover. 2. M.P. Jain — Noted that Article 277 illustrates the cooperative nature of Indian federalism, preserving existing revenue structures rather than imposing abrupt centralisation.