101st Constitutional Amendment Act, Importance, Key Details

Under 101st Constitutional Amendment Act, Goods and Service tax which is popularly known as GST was included in the Constitution of India. Article 366(12A) discusses the same which also refers to tax applied to the supply of goods, services or even both from which sale of alcohol is exempted.

The Goods and Services Tax (GST) marked a major shift in the Indirect Tax System of India. It merged several Central and State taxes into a single tax, resolving the issue of double taxation. For consumers, one of the biggest benefits was the expected drop in the overall tax burden on goods earlier around 25-30%. It also made the cost of taxes more transparent, so people could actually see how much they were paying.

101st Constitutional Amendment Act

Article 246 of the Indian Constitution splits legislative powers, including taxation, between the Parliament and State Legislatures. The Constitution ensures that fiscal powers of the Centre and the States are clearly separated, with minimal overlap.

The Centre can tax the manufacture of goods except alcoholic beverages for human use, opium, and narcotic drugs. States are allowed to tax the sale of goods, but not their manufacture. For inter-state sales, the Centre levies a tax called the Central Sales Tax, but the revenue goes entirely to the state where the sale originated.

When it comes to services, only the Centre is allowed to impose a service tax. States cannot levy taxes on the import or export of goods; this power lies solely with the Centre. The Centre also collects additional customs duties (CVD and SAD) to make up for taxes like excise duty and VAT that would apply if the same goods were made domestically.

With the launch of GST, the Constitution had to be amended to give both the Centre and States the power to tax and collect GST.

Also Check: 103rd Constitutional Amendment Act

Legislative Basis Of GST

The GST Bill was first introduced in the 16th Lok Sabha in 2014. It was passed by the Lok Sabha in May 2015 and, after a few changes, cleared the Rajya Sabha in August 2016. Once the required number of states ratified it, the Bill received the President’s assent on September 8, 2016, and became the 101st Constitutional Amendment. The GST Council was formed soon after, on September 12, 2016, with a dedicated Secretariat to guide its work. To ensure a smooth rollout of GST, several committees and sector-specific groups were created, including representatives from both the Centre and the States.

Important provisions of the Bill

• Central GST (CGST) subsumes excise duty, service tax, and other central levies
• State GST (SGST) covers VAT, luxury tax, and other state-level taxes.
• For interstate trade, GST is applied through the Integrated GST (IGST). IGST isn’t a separate tax but a mechanism to coordinate tax sharing between the Centre and the States. 
• To enable this framework, the Constitution was amended to include Articles 246A, 269A, and 279A, along with key changes to the 7th Schedule.

Key aspects of Article 246 (A)

Article 246A establishes that both the Union and the States can make laws on goods and services tax. In the case of intra-state trade, both the Centre and the State have the authority to levy GST. However, when it comes to inter-state trade and commerce, only the central government has the exclusive power to impose GST.

Key aspects of Article 269 A

Article 269A deals with the taxation of inter-state trade under GST. It discusses that the Government of India will collect this tax and then distribute it between the Centre and the States, based on the recommendations of the GST Council.

Key aspects of Article 279-A

Article 279A mandates the President to establish a GST Council within sixty days of the Act coming into force. The Council is chaired by the Union Finance Minister, with the Union Minister of State for Revenue or Finance as a member. Each state nominates one minister in charge of finance or taxation. In terms of decision-making, the Centre holds one-third of the voting power, while the states share the remaining two-thirds. Any decision requires a three-fourths majority to pass.

Key Aspects of List I

• The Article mandates the President to constitute a GST Council within sixty days of the GST Act coming into effect.
• The GST Council will be headed by the Union Finance Minister, who will serve as its Chairman.
• The Union Minister of State in charge of Revenue or Finance will also be a member of the Council.
• Each state will nominate one member who is in charge of finance or taxation.
• The Council’s structure ensures that the central government holds one-third of the total voting power.
• The remaining two-thirds of the voting power rests with the states collectively.
• For any decision to be passed in the Council, a three-fourths majority vote is required.

Also Check: 104th Constitutional Amendment Act

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Main Features of GST

• Levied on Supply: GST applies to the supply of goods and services, replacing earlier taxes on manufacturing, sales, or service provision.
• Destination-Based Tax: It follows a destination-based model, meaning the tax revenue goes to the state where goods or services are consumed, not where they’re produced.
• Dual Structure: GST has two components, Central GST (CGST) levied by the Centre and State GST (SGST) levied by the States both charged on the same transaction.
• Import as Inter-State Supply: Imports are treated as inter-state supplies and attract Integrated GST (IGST), along with customs duties.
• Rates Decided by GST Council: GST rates for CGST, SGST, and IGST are decided through mutual agreement between the Centre and States, based on recommendations by the GST Council.

Multiple Tax Slabs: GST was introduced with multiple tax rates 5%, 12%, 18%, and 28% with goods and services classified under each slab by the GST Council.