“Constitution is not a mere lawyers document, it is a vehicle of life and its spirit is always the spirit of age”
The Constitution of India is the world’s longest written constitution comprising 448 Articles, grouped into 22 Parts and 12 Schedules, with an ideological breadth spanning even farther realms. The Constitution provides the foundation on which the three organs of Government, namely the Legislature, Executive and the Judiciary derive their roles and responsibilities from.
The Constitution of India, often referred to as the ‘Grundnorm’ is the basic principle on which the entirety of the relavant laws, including taxation statutes have been formulated. The Indian Tax system, being highly extensive in nature, vests power on the Government to levy and recover taxes from individuals and organizations which is then redirected for the development of infrastructure, healthcare, education and maintenance of public facilities and governmental bodies. In light of the 75th Anniversary of the enactment of the Constitution of India, let us take a look at the various aspects of the Constitution which pertains to taxation and its operative mechanism.
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26th November 1949 marks the day the Constituent Assembly of India adopted the Constitution, laying the groundwork for the nation’s governance. The Constitution of India was the result of almost 3 years of discussions and deliberations by the Constituent Assembly presided over by Dr. Rajendra Prasad which resulted in the ratification of the Constitution on 26th November, 1949. Constitution Day, also known as Samvidhan Divas, is a stark reminder of our duties as citizens and the responsibility of the Government to always work for its people and never against them.
Dr. B.R. Ambedkar, the Chairman of the Drafting Committee, is often revered as the “chief architect” of the Constitution. Dr. Ambedkar’s legal background proved to be integral to his pioneering work in ensuring legal ratification of social justice, economic equality, and federalism, few of the key tenets shaping the Constitution.
Ambedkar emphasized a fiscally federal structure, balancing the financial powers of the Union of India and constituent States to prevent cascading of powers. He advocated for a progressive taxation system to reduce inequalities and fund welfare initiatives, ensuring economic justice for all. Dr. Ambedkar was a vocal critic of the revenue system of the British Government, citing its gross prejudice against the poor people of India and sought to make reparations through the proposed Constitution.
Some of the key features of a Good taxation policy as enumerated by Dr. B.R. Ambedkar are:
An Ideal tax structure among a lot of other things should always be accountable to the people, the funds collected through Direct and Indirect taxes should always reflect on the facilities available to the public, and development of the nation. A good tax structure should be certain on its levies, the reasoning and the mode of implementation and recourse available to aggrieved persons.
In India, there are two main kinds of taxes – Direct and Indirect Taxes. While Direct Taxes are non-transferable and paid directly by the Taxpayer to the Government, Indirect Taxes are transferable taxes that are imposed by the government and are usually included in the prices charged for goods and services.
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The crafters of our Constitution kept in mind the requirements of both, the rulers and ruled, while laying down the groundwork for the Taxation system enshrined within Part XII of the Constitution. Some of the key considerations included by the makers included Revenue Distribution between the Union and the States to balance the fiscal needs of both entities; Economic Equity, ensuring a progressive tax mechanism and; Flexibility permitting amendments and revisions to tax legislation on the basis of socio-economic factors.
Another prominent element is the Judicial Oversight over the implementation of the tax regime. The overarching nature of the Judicial System establishes checks and balances to avert the misuse of taxation powers vested upon the government.
The Constitution contains numerous provisions pertaining to Taxation, enshrined primarily in Part XII, but is aided by various other Articles as well.
Taxation is bound by the Fundamental Rights, Directive Principles of State Policy ( DPSP ) and other guiding principles of the legislature enshrined in the Constitution, ensuring citizens are treated equitably. Although taxation is not explicitly referred to in numerous key articles, they have proven to be inalienable to the modeling of taxation statutes.
Article 265 establishes that no tax shall be levied or collected without the authority of law. It underscores that valid legislation is required for the levy and collection of all taxes.
Articles 268 to 270 governs the levy of customs duties, excise taxes, and other import/export-related taxes. While these taxes are imposed by the Union government, the revenue generated is shared equitably between the Union and State governments.
Articles 276 and 277 authorize States to levy specific taxes, including professional taxes or cess, for the benefit of the State or local authorities, such as municipalities or district boards. These taxes cover professions, trades, and other employment-related activities.
Articles 271 and 279 provide for concurrent taxation powers, allowing both the Union and State governments to levy taxes on certain subjects. In case of conflict, Union laws take precedence over State legislation.
Articles 273, 275, and 282 pertain to grants-in-aid provided by the Union government to States in order to support their financial requirements. These grants are used for public purposes such as education, healthcare, and infrastructure development.
Article 274 requires Prior Recommendation of the President for Bills affecting Taxation which are disbursed to States
Article 286 restricts States from levying tax on the supply of goods and services where such supply occurs outside the state; or in the course of import into or export from India.
While Article 14 guarantees equality before the law, ensuring that tax laws are non-arbitrary and non-discriminatory, Article 19(1)(g) safeguards the right of an individual to practice any profession, trade, or business, placing reasonable restrictions on tax burdens that could hinder economic activity.
The Directive Principles of State Policy (DPSP) enshrined in Part IV of the Constitution serve as guiding principles for the framing of laws and include taxation policies as well.. Article 38 directs the state to minimize income inequalities, encouraging progressive taxation. Article 39 promotes the equitable distribution of resources to ensure social justice, often achieved through wealth and inheritance taxes.
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India’s tax system has evolved through various reforms and amendments to address changing economic conditions. The introduction of the Goods and Services Tax (GST) regime through the 101st Constitutional Amendment sought to unify the country’s indirect tax system, subsuming multiple state and central taxes within it to create a seamless market. The Finance Commission, established under Article 280, periodically revises revenue-sharing mechanisms between the Union and States to adapt to fiscal challenges.
The Income Tax Act, 1961 which regulates direct taxes plays a key role in ensuring progressive taxation. Article 279A effectuates the establishment of the GST Council, which is the key statutory body responsible for revising tax rates, slabs, and policy frameworks for goods and services. The Union Finance Minister serves as its Chairperson and also comprises Ministers from all States. The GST Council ensures that tax reforms are consensus-driven and aligned with the nation’s economic needs.
The Indian judiciary is entrusted with safeguarding constitutional principles in taxation by means of judicial review. Such duty is vested upon the judiciary to ensure that tax laws wholly adhere to the Constitution and do not infringe upon fundamental rights of the people. Courts play a critical role in resolving disputes between taxpayers and the state, interpreting the scope of taxation powers under the Seventh Schedule, and maintaining federal balance.
Many taxation-oriented Decisions have been rendered by the Courts in light of the provisions of the Constitution. Some landmark judgments are:
The judiciary has struck down several tax laws deemed arbitrary or excessive, reinforcing accountability and fairness. Courts have also clarified ambiguous provisions, ensuring that taxation aligns with constitutional values.
The Way Ahead On Constitution Day, we celebrate not just the enactment of the Constitution but also the principles it enshrines, including those guiding taxation. The framers envisioned a system that balances revenue generation with justice, ensuring cohesion between the governmental machinery. As taxpayers, we contribute to this vision, funding nation-building while upholding our constitutional obligations of compliance, equity, and accountability in taxation. Together, we can ensure that India’s fiscal framework continues to support its aspirations for justice, liberty, and equality for all.
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