Articles 245 to 279A: Understanding the Constitutional Backbone of Indian Taxation

India’s Constitution, adopted in 1950, lays out the basic structure for how the country is governed. One of its most important roles is to decide how powers are divided between the Union (Central Government) and the State Governments. Among these powers, taxation plays a key role, as it helps both levels of government raise the money they need to function.

The rules related to taxation are mainly found in Articles 245 to 279A, which are part of Parts XI and XII of the Constitution. These articles explain who can make tax laws, how taxes should be shared between the Centre and the States, and how modern taxes like GST (Goods and Services Tax) are handled. Together, they form the backbone of India’s taxation system.

Law-Making Powers and Taxation (Articles 245 to 255)

Article 245 explains who can make laws in India.

• Parliament can make laws for the entire country or any part of it.
• State Legislatures can make laws for their own states. Even if a law made by Parliament applies outside India, it is still valid. This is important in the case of taxes on international transactions.

Article 246 is especially important for taxation. It divides law-making power between the Union and the States by using the Seventh Schedule, which contains three lists:

• Union List – Taxes only the Central Government can collect. This includes income tax (Entry 82), customs duty (Entry 83), and corporation tax (Entry 85).
• State List – Taxes that only States can collect. This includes taxes on agricultural income (Entry 46), land revenue (Entry 48), and sales tax (Entry 54).
• Concurrent List – Both the Centre and States can make laws on the subjects in this list, but not usually on taxation. Taxes are mainly governed by the Union and State Lists.

A major change came with Article 246A, added in 2016 through the 101st Constitutional Amendment. This article gave both the Centre and the States the power to levy and collect GST.

• The Centre collects GST on inter-state transactions.
• The States collect GST on intra-state transactions.

This change helped create a more unified tax system, avoiding the problem of multiple taxes being added on top of each other.

Sharing of Tax Revenue and Financial Relations (Articles 264 to 279A)

These articles explain how taxes are collected and shared between the Centre and the States.

• Article 268: Some taxes, like stamp duties, are levied by the Centre but collected and kept by the States.
• Article 269: Some taxes, like those on inter-state trade or services, are collected by the Centre but given to the States.
• Article 270: Certain taxes, like income tax, are shared between the Centre and States based on rules set by the Finance Commission.
• Article 280: This article establishes the Finance Commission, which is formed every five years to suggest how to divide tax revenue and address differences in the needs and capacities of different States.

A key modern addition is Article 279A, which also came through the 101st Amendment. It sets up the Goods and Services Tax (GST) Council.

This Council includes:

• The Union Finance Minister (Chairperson),
• The Union Minister of State for Revenue,
• The Finance Ministers of all States, one of whom serves as the Vice-Chairperson.

The GST Council plays a major role in how GST is implemented. It:

• Recommends which taxes should be included in GST,
• Decides which goods and services are taxed or exempt,
• Sets the GST rates and exemption limits,
• Advises on special treatment for certain States (like hilly or border States),
• Decides when GST should be applied to petroleum products.

For decisions to be passed in the Council, a three-fourths majority is required. The Centre has one-third of the voting power, while all the States together have two-thirds. This ensures that both sides work together, a principle known as cooperative federalism.

The Council also helps solve disagreements between the Centre and the States about how GST should be applied.

Basic Rule of Law in Taxation (Article 265)

Article 265 states a simple but powerful rule:

“No tax shall be levied or collected except by authority of law.”

This means:

• A government can only collect tax if there is a valid law that allows it.
• Taxes cannot be arbitrary.
• This rule ensures fairness, transparency, and accountability in how taxes are imposed.

It protects citizens and businesses from being taxed without legal justification and upholds the principle of rule of law.

Real-Life Impact and Current Relevance

These constitutional provisions have real effects on how tax is applied and shared in India:

• The Seventh Schedule ensures that both Centre and States know their responsibilities and do not overlap in taxing the same thing. For example, central excise falls under the Union List, while tax on professions is in the State List.
• The GST Council, created under Article 279A, has been crucial in rolling out GST smoothly since 2017. It helps unify India’s indirect tax system and creates a single national market.
• The Finance Commission, under Article 280, plays an important role in helping poorer states by recommending how to fairly distribute tax money.

At the same time, there are some challenges. Some States feel that they are not receiving enough GST compensation, or that their financial freedom is limited. These issues reflect the ongoing need to balance national unity with state autonomy. However, the Constitution provides a strong and flexible structure to resolve such issues through bodies like the GST Council and Finance Commission.

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