Constitutional Amendment

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Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. Article 264 & 293 of the constitution are related to the financial relations between the union government and State governments. Under these articles specific powers are given to central government and state government to levy and collect the taxes in India.

The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.

Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax as GST is levied on every supply of goods and/or services irrespective of the activity involved in the supply.

Since, introduction of GST is adversely affecting the financial interest of the state government hence an amendment is Indian constitution is required.
The Constitution 101st Amendment Act has received presidential assent on 8th September 2016 and on this date the GST Constitutional (122nd Amendment) Bill 2014 becomes the GST Constitutional (101th Amendment) Act 2016. This act paves the way for introduction of Goods & Services Tax (GST) by making Special provision with respect to goods and services tax.

With this amendment both parliament and state legislatures shall have concurrent powers to make laws with respect to goods and services tax (GST). The Parliament will retain exclusive power to legislate on inter-state trade or commerce.

In case of the inter-state trade, the tax will be levied and collected by the Government of India and shared between the Union and States as per recommendation of the GST Council.

The amendment Act contains 20 amendments. As per Sub Section (2) of Section 1, the constitutional amendments are to be enforced with effect from such date as the Central Government may, by notification in the Official Gazette, appoint. The central government, in exercise of this power has appointed the 16th day of September, 2016 as the date on which the provisions of Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 17, 18, 19 and 20 of the said Constitutional amendment Act, shall come into force. This notification has been issued to carry out the provisions of Constitutional amendments.