Constitutional Basis of GST — the 101st Amendment (2016) — Law of Taxation Notes

Constitutional Basis of GST — the 101st Amendment (2016)

There was a constitutional problem before GST could be born. The old scheme let the Centre tax manufacture and services, and the States tax sale of goods — neither could tax the whole supply chain of both goods and services. To let both governments tax the same supply, the Constitution itself had to be amended. That amendment — the 101st — is the legal foundation of GST.

Why an amendment was needed, and what it did

Under Article 246 and the Seventh Schedule (Unit I), taxation was exclusively divided — the Centre and States could not both tax the same transaction of goods and services. GST needed concurrent power. So Parliament passed the Constitution (One Hundred and First Amendment) Act, 2016 (introduced as the 122nd Amendment Bill — a favourite exam trap: it is the 101st Act but the 122nd Bill), effective from September 2016, and GST rolled out on 1 July 2017.

The key provisions inserted:

A. Article 246A — the charging power. Gives both Parliament and the State legislatures concurrent power to make laws on GST; Parliament has exclusive power over inter-State supply (IGST).

Article 246A(1): “Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.”

B. Article 269A — inter-State supply. GST on inter-State supply is levied and collected by the Government of India (IGST) and apportioned between the Union and the States as the GST Council recommends. Import of goods/services is treated as inter-State.

C. Article 279A — the GST Council. Directs the President to constitute a GST Council to make recommendations on rates, exemptions, model laws and dispute resolution (Topic 5).

Other changes: Article 366(12A) defines GST; Entry 84 of List I was restricted (excise now only on petroleum products and tobacco); Entry 52 (entry tax) and 55 (advertisements) etc. were omitted; and the GST (Compensation to States) Act, 2017 guaranteed States compensation for revenue loss for five years (Unit IV).

Article 366(12A): “‘goods and services tax’ means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption.”

Note: alcoholic liquor for human consumption is kept outside GST (still taxed by States), and petroleum products and tobacco are within the GST net but not yet notified for GST rates.

In Simple Terms: The Constitution had to be changed so the Centre and the States could both tax the same supply. The 101st Amendment (2016) did this — Art. 246A gives both concurrent power, Art. 269A handles inter-State supply (IGST), and Art. 279A creates the GST Council. Remember: 101st Act, 122nd Bill.

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    ROOT["Constitution (101st Amendment) Act 2016<br/>(122nd Bill)"]:::root
    ROOT --> A["Art. 246A<br/>Centre + States: concurrent GST power"]:::leaf
    ROOT --> B["Art. 269A<br/>inter-State supply = IGST by Centre, apportioned"]:::leaf
    ROOT --> C["Art. 279A<br/>GST Council"]:::leaf
    ROOT --> D["Art. 366(12A) defines GST<br/>(liquor out; petro/tobacco in but not notified)"]:::leaf
    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

Case Laws

Union of India v Mohit Minerals (P) Ltd. (2022) — interpreted Arts. 246A and 279A; GST Council recommendations are recommendatory, reflecting cooperative federalism.

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