Ch 41 - Constitutional Background of GST | GST Saral by CA Dhruv Aggarwal PDF Download

 Page 1


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 41 - Constitutional Background of GST 
 
 
 
 
 
CHAPTER 41 
 
Constitutional Background of GST 
 
41.1 Relevance  of Constitutional provisions 
 
Understanding basic concepts of taxation under Constitution is essential to understand scope and limitations of 
GST. 
 
Constitution of India makes provisions  relating to taxation powers  of Union and States.  GST cannot be 
imposed as the Constitutional provisions stand today. 
The Constitution of India has been to incorporate provisions relating to GST. 
 
The Constitution (one hundred and First Amendment) Bill, 2014 has been passed by Lok Sabha on 6-5- 
2015. It has been passed by Rajya Sabha on 3-8-2016 after making certain amendments. These amendments 
have been approved by Lok Sabha. 
The Bill was ratified by 17 States. It was assented by President on 8-9-2016 and a l provisions relating to the 
Constitutional amendments have been notified on 12-9-2016 and 16-9-2016. 
 
The relevant provisions of Constitution of India and the changes as made w.e.f. 16-9-2016 are discussed 
below. 
41.1-1 Bifurcation of power between Union and States 
 
Article 1(1) of Constitution of India states that India, that is Bharat, shall be a Union of States. 
 
Thus, India has federal structure of governance, like USA, Australia, UAE etc. i.e. Union Government and 
State Governments. 
 
Natura ly, when there are two authorities, bifurcation of power is required between Union and State to avoid 
conf licts, disputes and ambiguities. 
Article 245(1) of Constitution of India states that subject to provisions of Constitution, Parliament may make 
laws for whole or any part of India and Legislature of a State may make laws for the whole or part of the 
State. 
Article  245(2)  of Constitution  of India  clarifies  that  law  made  by Parliament  can have  extra-territorial 
operation. 
Article 246(1) of the Constitution specifies that Parliament has exclusive powers to make laws with respect to 
any of the matters enumerated in List I in the Seventh Schedule to Constitution. 
As per Article 246(3) of Constitution of India, State Governments have exclusive powers to make laws with 
respect to matters enumerated in List II (State List). 
In respect  of matters  enumerated  in List  III  (termed  as  'Concurrent  List'),  both  Parliament  and  State 
Governments have power to make laws. 
 
As per Article 246(4) of Constitution of India, Parliament can make laws in respect of Union Territories even 
Page 2


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 41 - Constitutional Background of GST 
 
 
 
 
 
CHAPTER 41 
 
Constitutional Background of GST 
 
41.1 Relevance  of Constitutional provisions 
 
Understanding basic concepts of taxation under Constitution is essential to understand scope and limitations of 
GST. 
 
Constitution of India makes provisions  relating to taxation powers  of Union and States.  GST cannot be 
imposed as the Constitutional provisions stand today. 
The Constitution of India has been to incorporate provisions relating to GST. 
 
The Constitution (one hundred and First Amendment) Bill, 2014 has been passed by Lok Sabha on 6-5- 
2015. It has been passed by Rajya Sabha on 3-8-2016 after making certain amendments. These amendments 
have been approved by Lok Sabha. 
The Bill was ratified by 17 States. It was assented by President on 8-9-2016 and a l provisions relating to the 
Constitutional amendments have been notified on 12-9-2016 and 16-9-2016. 
 
The relevant provisions of Constitution of India and the changes as made w.e.f. 16-9-2016 are discussed 
below. 
41.1-1 Bifurcation of power between Union and States 
 
Article 1(1) of Constitution of India states that India, that is Bharat, shall be a Union of States. 
 
Thus, India has federal structure of governance, like USA, Australia, UAE etc. i.e. Union Government and 
State Governments. 
 
Natura ly, when there are two authorities, bifurcation of power is required between Union and State to avoid 
conf licts, disputes and ambiguities. 
Article 245(1) of Constitution of India states that subject to provisions of Constitution, Parliament may make 
laws for whole or any part of India and Legislature of a State may make laws for the whole or part of the 
State. 
Article  245(2)  of Constitution  of India  clarifies  that  law  made  by Parliament  can have  extra-territorial 
operation. 
Article 246(1) of the Constitution specifies that Parliament has exclusive powers to make laws with respect to 
any of the matters enumerated in List I in the Seventh Schedule to Constitution. 
As per Article 246(3) of Constitution of India, State Governments have exclusive powers to make laws with 
respect to matters enumerated in List II (State List). 
In respect  of matters  enumerated  in List  III  (termed  as  'Concurrent  List'),  both  Parliament  and  State 
Governments have power to make laws. 
 
As per Article 246(4) of Constitution of India, Parliament can make laws in respect of Union Territories even 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
in respect of matters covered in State List. 
 
41.1-2 Residuary powers with Parliament 
 
Article 248 of Constitution of India makes it clear that Parliament has exclusive powers to make any law in 
respect of any matter not enumerated in the Concurrent List or State List. These include the power of making 
any law imposing a tax not mentioned in Concurrent List or State List. This is also stated in entry 97 of List I 
of Seventh Schedule. 
Thus, a l residual powers are with Parliament i.e. Union Government. 
 
41.1-3 Union List relevant to taxation 
 
List I, ca led "Union List", contains entries like Defence of India, Foreign Affairs, War and Peace, Banking etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016 are as follows : 
Entry No. 82 - Tax on income other than agricultural income. 
 
Entry No. 83 - Duties of customs including export duties. 
 
Entry  No. 84 - Duties of excise on the fo lowing goods manufactured  or produced  in India, namely (a) 
petroleum coke (b) high speed diesel (c) motor spirit (commonly known as petrol) (d) natural gas (e) aviation 
turbine fuel and (f) tobacco and tobacco products [The entry was reading as follows upto 16-9-2016] - 
Duties of excise on tobacco and other goods manufactured or produced in India except (a) liquors for human 
consumption  (b)  opium,  Indian  hemp  and  other  narcotic  drugs,  -  -  but  including  medicinal  and  toilet 
preparations containing alcohol or any substance included in sub-paragraph (b) of this entry 
Entry No. 85 - Corporation Tax. 
 
Entry  No. 86 - Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and 
companies, taxes on the capital of companies. 
Entry No. 87 - Estate duty in respect of property other than agricultural land 
 
Entry No. 88 - Duties in respect of succession or property other than agricultural income 
 
Entry No. 89 - Terminal taxes on goods or passengers, carried by railways, sea or air; taxes on railway fares 
and freights 
Entry No. 90 - Taxes other than stamp duties on transactions in stock exchanges and future markets. 
 
Entry No. 91 - Rates of stamp duty in respect of Bills of exchange, cheques, promissory notes, Bill of 
lading, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts 
Entry  No. 92 - Omitted [The entry was as follows upto 16-9-2016] - Taxes on the sale or purchase of 
newspapers and on advertisements published therein. 
Entry  No. 92A - Taxes on the Sale or purchase  of goods other than newspapers,  where such sale or 
purchase takes place in the course of inter-state trade or commerce. 
Entry No. 92B - Taxes on consignment of goods (whether the consignment is to the person making it or to 
any other person), where such consignment takes place during Inter-state trade or commerce. 
Entry No. 92C - Omitted [The entry was as follows upto 16-9-2016 -tax on services - even that entry was 
never notified and was never effective. 
Entry No. 96 - Fees in respect of any of the matters in this List, but not including fees taken in any court. 
 
Entry No. 97 - Any other matter not included in List II or List III including any tax not mentioned in list II or 
list III. (Entry No. 97 covers all 'Residual Powers'.) 
Page 3


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 41 - Constitutional Background of GST 
 
 
 
 
 
CHAPTER 41 
 
Constitutional Background of GST 
 
41.1 Relevance  of Constitutional provisions 
 
Understanding basic concepts of taxation under Constitution is essential to understand scope and limitations of 
GST. 
 
Constitution of India makes provisions  relating to taxation powers  of Union and States.  GST cannot be 
imposed as the Constitutional provisions stand today. 
The Constitution of India has been to incorporate provisions relating to GST. 
 
The Constitution (one hundred and First Amendment) Bill, 2014 has been passed by Lok Sabha on 6-5- 
2015. It has been passed by Rajya Sabha on 3-8-2016 after making certain amendments. These amendments 
have been approved by Lok Sabha. 
The Bill was ratified by 17 States. It was assented by President on 8-9-2016 and a l provisions relating to the 
Constitutional amendments have been notified on 12-9-2016 and 16-9-2016. 
 
The relevant provisions of Constitution of India and the changes as made w.e.f. 16-9-2016 are discussed 
below. 
41.1-1 Bifurcation of power between Union and States 
 
Article 1(1) of Constitution of India states that India, that is Bharat, shall be a Union of States. 
 
Thus, India has federal structure of governance, like USA, Australia, UAE etc. i.e. Union Government and 
State Governments. 
 
Natura ly, when there are two authorities, bifurcation of power is required between Union and State to avoid 
conf licts, disputes and ambiguities. 
Article 245(1) of Constitution of India states that subject to provisions of Constitution, Parliament may make 
laws for whole or any part of India and Legislature of a State may make laws for the whole or part of the 
State. 
Article  245(2)  of Constitution  of India  clarifies  that  law  made  by Parliament  can have  extra-territorial 
operation. 
Article 246(1) of the Constitution specifies that Parliament has exclusive powers to make laws with respect to 
any of the matters enumerated in List I in the Seventh Schedule to Constitution. 
As per Article 246(3) of Constitution of India, State Governments have exclusive powers to make laws with 
respect to matters enumerated in List II (State List). 
In respect  of matters  enumerated  in List  III  (termed  as  'Concurrent  List'),  both  Parliament  and  State 
Governments have power to make laws. 
 
As per Article 246(4) of Constitution of India, Parliament can make laws in respect of Union Territories even 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
in respect of matters covered in State List. 
 
41.1-2 Residuary powers with Parliament 
 
Article 248 of Constitution of India makes it clear that Parliament has exclusive powers to make any law in 
respect of any matter not enumerated in the Concurrent List or State List. These include the power of making 
any law imposing a tax not mentioned in Concurrent List or State List. This is also stated in entry 97 of List I 
of Seventh Schedule. 
Thus, a l residual powers are with Parliament i.e. Union Government. 
 
41.1-3 Union List relevant to taxation 
 
List I, ca led "Union List", contains entries like Defence of India, Foreign Affairs, War and Peace, Banking etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016 are as follows : 
Entry No. 82 - Tax on income other than agricultural income. 
 
Entry No. 83 - Duties of customs including export duties. 
 
Entry  No. 84 - Duties of excise on the fo lowing goods manufactured  or produced  in India, namely (a) 
petroleum coke (b) high speed diesel (c) motor spirit (commonly known as petrol) (d) natural gas (e) aviation 
turbine fuel and (f) tobacco and tobacco products [The entry was reading as follows upto 16-9-2016] - 
Duties of excise on tobacco and other goods manufactured or produced in India except (a) liquors for human 
consumption  (b)  opium,  Indian  hemp  and  other  narcotic  drugs,  -  -  but  including  medicinal  and  toilet 
preparations containing alcohol or any substance included in sub-paragraph (b) of this entry 
Entry No. 85 - Corporation Tax. 
 
Entry  No. 86 - Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and 
companies, taxes on the capital of companies. 
Entry No. 87 - Estate duty in respect of property other than agricultural land 
 
Entry No. 88 - Duties in respect of succession or property other than agricultural income 
 
Entry No. 89 - Terminal taxes on goods or passengers, carried by railways, sea or air; taxes on railway fares 
and freights 
Entry No. 90 - Taxes other than stamp duties on transactions in stock exchanges and future markets. 
 
Entry No. 91 - Rates of stamp duty in respect of Bills of exchange, cheques, promissory notes, Bill of 
lading, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts 
Entry  No. 92 - Omitted [The entry was as follows upto 16-9-2016] - Taxes on the sale or purchase of 
newspapers and on advertisements published therein. 
Entry  No. 92A - Taxes on the Sale or purchase  of goods other than newspapers,  where such sale or 
purchase takes place in the course of inter-state trade or commerce. 
Entry No. 92B - Taxes on consignment of goods (whether the consignment is to the person making it or to 
any other person), where such consignment takes place during Inter-state trade or commerce. 
Entry No. 92C - Omitted [The entry was as follows upto 16-9-2016 -tax on services - even that entry was 
never notified and was never effective. 
Entry No. 96 - Fees in respect of any of the matters in this List, but not including fees taken in any court. 
 
Entry No. 97 - Any other matter not included in List II or List III including any tax not mentioned in list II or 
list III. (Entry No. 97 covers all 'Residual Powers'.) 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
41.1-4 State  list pertaining to taxation 
 
State Government has exclusive powers to make laws in respect of matters in List II of Seventh Schedule to 
our Constitution. These entries include Police, Public Health, Agriculture, Land, water supplies etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016. are as fo lows: 
 
Entry  No. 33 - Theatres and dramatic performances; cinemas subject to provisions of Entry 60 of List I; 
sports, entertainments and amusements 
 
Entry No. 34 - Betting and gambling 
 
Entry  No. 45 - Land revenue, including the assessment and co lection of revenue, the maintenance of land 
records, survey for revenue purposes and records of rights, alienation of revenues. 
Entry No. 46 - Taxes on agricultural income. 
 
Entry No. 47 - Duties in respect of succession to agricultural land 
 
Entry No. 48 - Estate duty in respect of agricultural land 
 
Entry No. 49 - Taxes on lands and buildings 
 
Entry No. 50 - Taxes on mineral ri ghts subject to any limitations imposed by Parliament by law relating to 
mineral development. 
Entry  No.  51  -  Duties  of excise  on the  fo lowing  goods  manufactured  or  produced  in the  State  and 
countervailing duties at the same rate or lower rates on similar goods manufactured or produced elsewhere in 
India - (a) alcoholic liquors for human consumption (b) opium, Indian hemp and other narcotic drugs and 
narcotics - - but not including medicinal and toilet preparations containing alcohol or any substance included in 
sub-paragraph (b) of this entry. 
Entry No. 52 - Omitted [Ti l 16-9-2016 the entry was as follows - Tax on entry of goods into a local area for 
consumption, use or sale therein (usually called Octroi or Entry tax). 
Entry No. 53 - Taxes on the consumption or sale of electricity. 
 
Entry No. 54 - 'Tax on sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), 
natural gas, aviation turbine fuel and alcoholic liquor for human consumption,  but not including sale in the 
course of inter-state trade or commerce or sale in the course of international trade or commerce of such goods 
[Ti l 16-9-2016 the entry was reading as follows - Tax on sale or purchase of goods other than newspaper, 
subject to the provisions of entry 92A of List I (i.e. except tax on inter-state sale or purchase]. 
Entry  No. 55 -  Omitted  [Ti l 16-9-2016  the entry was as follows -  Tax on advertisements  other than 
advertisements in newspapers and advertisements broadcast by radio or television]. 
Entry No. 56 - Tax on goods and passengers carried by road or in inland waterways. 
 
Entry No. 57 - Taxes on vehicles, whether mechanica ly prope led or not, suitable for use on roads, including 
tramcars subject to the provisions of entry 35 of List III (The principles  on which tax on mechanically 
propelled vehicles is concurrent subject under Entry 35 of List III). 
Entry No. 58 - Taxes on animals and boats. 
 
Entry No. 59 - To ls. 
 
Entry No. 60 - Tax on professions, trades, ca lings and employment. 
 
Entry No. 61 - Capitation taxes. 
 
Entry No. 62 - Tax on entertainment and amusements to the extent levied and co lected by a Panchayat or a 
Page 4


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 41 - Constitutional Background of GST 
 
 
 
 
 
CHAPTER 41 
 
Constitutional Background of GST 
 
41.1 Relevance  of Constitutional provisions 
 
Understanding basic concepts of taxation under Constitution is essential to understand scope and limitations of 
GST. 
 
Constitution of India makes provisions  relating to taxation powers  of Union and States.  GST cannot be 
imposed as the Constitutional provisions stand today. 
The Constitution of India has been to incorporate provisions relating to GST. 
 
The Constitution (one hundred and First Amendment) Bill, 2014 has been passed by Lok Sabha on 6-5- 
2015. It has been passed by Rajya Sabha on 3-8-2016 after making certain amendments. These amendments 
have been approved by Lok Sabha. 
The Bill was ratified by 17 States. It was assented by President on 8-9-2016 and a l provisions relating to the 
Constitutional amendments have been notified on 12-9-2016 and 16-9-2016. 
 
The relevant provisions of Constitution of India and the changes as made w.e.f. 16-9-2016 are discussed 
below. 
41.1-1 Bifurcation of power between Union and States 
 
Article 1(1) of Constitution of India states that India, that is Bharat, shall be a Union of States. 
 
Thus, India has federal structure of governance, like USA, Australia, UAE etc. i.e. Union Government and 
State Governments. 
 
Natura ly, when there are two authorities, bifurcation of power is required between Union and State to avoid 
conf licts, disputes and ambiguities. 
Article 245(1) of Constitution of India states that subject to provisions of Constitution, Parliament may make 
laws for whole or any part of India and Legislature of a State may make laws for the whole or part of the 
State. 
Article  245(2)  of Constitution  of India  clarifies  that  law  made  by Parliament  can have  extra-territorial 
operation. 
Article 246(1) of the Constitution specifies that Parliament has exclusive powers to make laws with respect to 
any of the matters enumerated in List I in the Seventh Schedule to Constitution. 
As per Article 246(3) of Constitution of India, State Governments have exclusive powers to make laws with 
respect to matters enumerated in List II (State List). 
In respect  of matters  enumerated  in List  III  (termed  as  'Concurrent  List'),  both  Parliament  and  State 
Governments have power to make laws. 
 
As per Article 246(4) of Constitution of India, Parliament can make laws in respect of Union Territories even 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
in respect of matters covered in State List. 
 
41.1-2 Residuary powers with Parliament 
 
Article 248 of Constitution of India makes it clear that Parliament has exclusive powers to make any law in 
respect of any matter not enumerated in the Concurrent List or State List. These include the power of making 
any law imposing a tax not mentioned in Concurrent List or State List. This is also stated in entry 97 of List I 
of Seventh Schedule. 
Thus, a l residual powers are with Parliament i.e. Union Government. 
 
41.1-3 Union List relevant to taxation 
 
List I, ca led "Union List", contains entries like Defence of India, Foreign Affairs, War and Peace, Banking etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016 are as follows : 
Entry No. 82 - Tax on income other than agricultural income. 
 
Entry No. 83 - Duties of customs including export duties. 
 
Entry  No. 84 - Duties of excise on the fo lowing goods manufactured  or produced  in India, namely (a) 
petroleum coke (b) high speed diesel (c) motor spirit (commonly known as petrol) (d) natural gas (e) aviation 
turbine fuel and (f) tobacco and tobacco products [The entry was reading as follows upto 16-9-2016] - 
Duties of excise on tobacco and other goods manufactured or produced in India except (a) liquors for human 
consumption  (b)  opium,  Indian  hemp  and  other  narcotic  drugs,  -  -  but  including  medicinal  and  toilet 
preparations containing alcohol or any substance included in sub-paragraph (b) of this entry 
Entry No. 85 - Corporation Tax. 
 
Entry  No. 86 - Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and 
companies, taxes on the capital of companies. 
Entry No. 87 - Estate duty in respect of property other than agricultural land 
 
Entry No. 88 - Duties in respect of succession or property other than agricultural income 
 
Entry No. 89 - Terminal taxes on goods or passengers, carried by railways, sea or air; taxes on railway fares 
and freights 
Entry No. 90 - Taxes other than stamp duties on transactions in stock exchanges and future markets. 
 
Entry No. 91 - Rates of stamp duty in respect of Bills of exchange, cheques, promissory notes, Bill of 
lading, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts 
Entry  No. 92 - Omitted [The entry was as follows upto 16-9-2016] - Taxes on the sale or purchase of 
newspapers and on advertisements published therein. 
Entry  No. 92A - Taxes on the Sale or purchase  of goods other than newspapers,  where such sale or 
purchase takes place in the course of inter-state trade or commerce. 
Entry No. 92B - Taxes on consignment of goods (whether the consignment is to the person making it or to 
any other person), where such consignment takes place during Inter-state trade or commerce. 
Entry No. 92C - Omitted [The entry was as follows upto 16-9-2016 -tax on services - even that entry was 
never notified and was never effective. 
Entry No. 96 - Fees in respect of any of the matters in this List, but not including fees taken in any court. 
 
Entry No. 97 - Any other matter not included in List II or List III including any tax not mentioned in list II or 
list III. (Entry No. 97 covers all 'Residual Powers'.) 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
41.1-4 State  list pertaining to taxation 
 
State Government has exclusive powers to make laws in respect of matters in List II of Seventh Schedule to 
our Constitution. These entries include Police, Public Health, Agriculture, Land, water supplies etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016. are as fo lows: 
 
Entry  No. 33 - Theatres and dramatic performances; cinemas subject to provisions of Entry 60 of List I; 
sports, entertainments and amusements 
 
Entry No. 34 - Betting and gambling 
 
Entry  No. 45 - Land revenue, including the assessment and co lection of revenue, the maintenance of land 
records, survey for revenue purposes and records of rights, alienation of revenues. 
Entry No. 46 - Taxes on agricultural income. 
 
Entry No. 47 - Duties in respect of succession to agricultural land 
 
Entry No. 48 - Estate duty in respect of agricultural land 
 
Entry No. 49 - Taxes on lands and buildings 
 
Entry No. 50 - Taxes on mineral ri ghts subject to any limitations imposed by Parliament by law relating to 
mineral development. 
Entry  No.  51  -  Duties  of excise  on the  fo lowing  goods  manufactured  or  produced  in the  State  and 
countervailing duties at the same rate or lower rates on similar goods manufactured or produced elsewhere in 
India - (a) alcoholic liquors for human consumption (b) opium, Indian hemp and other narcotic drugs and 
narcotics - - but not including medicinal and toilet preparations containing alcohol or any substance included in 
sub-paragraph (b) of this entry. 
Entry No. 52 - Omitted [Ti l 16-9-2016 the entry was as follows - Tax on entry of goods into a local area for 
consumption, use or sale therein (usually called Octroi or Entry tax). 
Entry No. 53 - Taxes on the consumption or sale of electricity. 
 
Entry No. 54 - 'Tax on sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), 
natural gas, aviation turbine fuel and alcoholic liquor for human consumption,  but not including sale in the 
course of inter-state trade or commerce or sale in the course of international trade or commerce of such goods 
[Ti l 16-9-2016 the entry was reading as follows - Tax on sale or purchase of goods other than newspaper, 
subject to the provisions of entry 92A of List I (i.e. except tax on inter-state sale or purchase]. 
Entry  No. 55 -  Omitted  [Ti l 16-9-2016  the entry was as follows -  Tax on advertisements  other than 
advertisements in newspapers and advertisements broadcast by radio or television]. 
Entry No. 56 - Tax on goods and passengers carried by road or in inland waterways. 
 
Entry No. 57 - Taxes on vehicles, whether mechanica ly prope led or not, suitable for use on roads, including 
tramcars subject to the provisions of entry 35 of List III (The principles  on which tax on mechanically 
propelled vehicles is concurrent subject under Entry 35 of List III). 
Entry No. 58 - Taxes on animals and boats. 
 
Entry No. 59 - To ls. 
 
Entry No. 60 - Tax on professions, trades, ca lings and employment. 
 
Entry No. 61 - Capitation taxes. 
 
Entry No. 62 - Tax on entertainment and amusements to the extent levied and co lected by a Panchayat or a 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Municipality or a Regional Council or a District Council [Ti l 16-9-2016 the entry was reading as follows - 
Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling]. Simultaneously, para 
8(3)(e)  has  been  inserted  in  Sixth  Schedule  to  Constitution  as  follows  'taxes  on  entertainment  and 
amusements'. Sixth Schedule to Constitution of India contains provisions for administration of Tribal Areas in 
State of Assam, Meghalaya, Tripura and Mizoram. Under the provisions of this Schedule, District Councils 
are constituted for each autonomous district. 
Entry No. 63 - Rates of stamp duty in respect of documents other than those specified in the provision of List 
I with regard to rates of stamp duty. 
 
Entry No. 66 - Fees in respect of any of the matters in this List (i.e. List II), but not including fees taken in 
any court. 
41.1-5 Concurrent list 
 
List III of Seventh Schedule, ca led "concurrent  list", includes matters where both Central Government and 
State Government  can make laws. This list includes entries like Criminal Law and Procedure,  Trust and 
Trustees, Civil procedures, economic and social planning, education, boilers, electricity, newspapers, forests, 
social security,  labour  welfare,  weights  and  measures,  trade  unions,  charitable  institutions,  price  control, 
factories, etc. 
There are only two entries relevant to taxation in this List. 
 
Entry No. 44 - Stamp duties other than duties or fees co lected by means of judicial stamps, but not including 
rates of stamp duty. 
Entry No. 47 - Fees in respect of any of the matters in this List (i.e. List III), but not including fees taken in 
any court. 
41.1-6 Amendment to empower Union and States  to levy GST 
 
Article  246A in Constitution of India  has been inserted  w.e.f.  16-9-2016  to give concurrent  powers  to 
Parliament and legislature of each State to make laws with respect to goods and service tax imposed by the 
Union or by such State. 
For this purpose, 'State' will include 'Union territory with legislature'- Article 366(26B) of Constitution of India 
[This will cover Delhi, Chandigarh and Puducherry]. 
 
As per Article 246(2) of Constitution of India as amended w.e.f. 16-9-2016, Parliament will have exclusive 
powers to make laws with respect of goods and services tax where the supply of goods, or of services, or 
both takes place in the course of inter-state trade or commerce. 
Explanation to Article 246 of Constitution of India states that GST on inter-state supply of petroleum crude, 
high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation and turbine fuel shall take 
effect from the date recommended by GST Council. 
Article 248 of Constitution of India as amended  w.e.f. 16-9-2016  provides  that Parliament  will have a l 
residuary powers to make laws, including taxation, but subject to Article 246A of Constitution of India (which 
confers concurrent powers of Union and States to levy GST). 
Thus, Parliament will not have powers in respect of State GST. 
 
Article 250 of Constitution of India is amended to provide for emergency powers of Parliament to make laws 
for whole or part of India, with respect to GST. 
Definition   of  'goods'  -  'Goods'  include  a l materials,  commodities  and  articles  -  Article  366(12)  of 
Constitution of India. 
Page 5


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 41 - Constitutional Background of GST 
 
 
 
 
 
CHAPTER 41 
 
Constitutional Background of GST 
 
41.1 Relevance  of Constitutional provisions 
 
Understanding basic concepts of taxation under Constitution is essential to understand scope and limitations of 
GST. 
 
Constitution of India makes provisions  relating to taxation powers  of Union and States.  GST cannot be 
imposed as the Constitutional provisions stand today. 
The Constitution of India has been to incorporate provisions relating to GST. 
 
The Constitution (one hundred and First Amendment) Bill, 2014 has been passed by Lok Sabha on 6-5- 
2015. It has been passed by Rajya Sabha on 3-8-2016 after making certain amendments. These amendments 
have been approved by Lok Sabha. 
The Bill was ratified by 17 States. It was assented by President on 8-9-2016 and a l provisions relating to the 
Constitutional amendments have been notified on 12-9-2016 and 16-9-2016. 
 
The relevant provisions of Constitution of India and the changes as made w.e.f. 16-9-2016 are discussed 
below. 
41.1-1 Bifurcation of power between Union and States 
 
Article 1(1) of Constitution of India states that India, that is Bharat, shall be a Union of States. 
 
Thus, India has federal structure of governance, like USA, Australia, UAE etc. i.e. Union Government and 
State Governments. 
 
Natura ly, when there are two authorities, bifurcation of power is required between Union and State to avoid 
conf licts, disputes and ambiguities. 
Article 245(1) of Constitution of India states that subject to provisions of Constitution, Parliament may make 
laws for whole or any part of India and Legislature of a State may make laws for the whole or part of the 
State. 
Article  245(2)  of Constitution  of India  clarifies  that  law  made  by Parliament  can have  extra-territorial 
operation. 
Article 246(1) of the Constitution specifies that Parliament has exclusive powers to make laws with respect to 
any of the matters enumerated in List I in the Seventh Schedule to Constitution. 
As per Article 246(3) of Constitution of India, State Governments have exclusive powers to make laws with 
respect to matters enumerated in List II (State List). 
In respect  of matters  enumerated  in List  III  (termed  as  'Concurrent  List'),  both  Parliament  and  State 
Governments have power to make laws. 
 
As per Article 246(4) of Constitution of India, Parliament can make laws in respect of Union Territories even 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
in respect of matters covered in State List. 
 
41.1-2 Residuary powers with Parliament 
 
Article 248 of Constitution of India makes it clear that Parliament has exclusive powers to make any law in 
respect of any matter not enumerated in the Concurrent List or State List. These include the power of making 
any law imposing a tax not mentioned in Concurrent List or State List. This is also stated in entry 97 of List I 
of Seventh Schedule. 
Thus, a l residual powers are with Parliament i.e. Union Government. 
 
41.1-3 Union List relevant to taxation 
 
List I, ca led "Union List", contains entries like Defence of India, Foreign Affairs, War and Peace, Banking etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016 are as follows : 
Entry No. 82 - Tax on income other than agricultural income. 
 
Entry No. 83 - Duties of customs including export duties. 
 
Entry  No. 84 - Duties of excise on the fo lowing goods manufactured  or produced  in India, namely (a) 
petroleum coke (b) high speed diesel (c) motor spirit (commonly known as petrol) (d) natural gas (e) aviation 
turbine fuel and (f) tobacco and tobacco products [The entry was reading as follows upto 16-9-2016] - 
Duties of excise on tobacco and other goods manufactured or produced in India except (a) liquors for human 
consumption  (b)  opium,  Indian  hemp  and  other  narcotic  drugs,  -  -  but  including  medicinal  and  toilet 
preparations containing alcohol or any substance included in sub-paragraph (b) of this entry 
Entry No. 85 - Corporation Tax. 
 
Entry  No. 86 - Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and 
companies, taxes on the capital of companies. 
Entry No. 87 - Estate duty in respect of property other than agricultural land 
 
Entry No. 88 - Duties in respect of succession or property other than agricultural income 
 
Entry No. 89 - Terminal taxes on goods or passengers, carried by railways, sea or air; taxes on railway fares 
and freights 
Entry No. 90 - Taxes other than stamp duties on transactions in stock exchanges and future markets. 
 
Entry No. 91 - Rates of stamp duty in respect of Bills of exchange, cheques, promissory notes, Bill of 
lading, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts 
Entry  No. 92 - Omitted [The entry was as follows upto 16-9-2016] - Taxes on the sale or purchase of 
newspapers and on advertisements published therein. 
Entry  No. 92A - Taxes on the Sale or purchase  of goods other than newspapers,  where such sale or 
purchase takes place in the course of inter-state trade or commerce. 
Entry No. 92B - Taxes on consignment of goods (whether the consignment is to the person making it or to 
any other person), where such consignment takes place during Inter-state trade or commerce. 
Entry No. 92C - Omitted [The entry was as follows upto 16-9-2016 -tax on services - even that entry was 
never notified and was never effective. 
Entry No. 96 - Fees in respect of any of the matters in this List, but not including fees taken in any court. 
 
Entry No. 97 - Any other matter not included in List II or List III including any tax not mentioned in list II or 
list III. (Entry No. 97 covers all 'Residual Powers'.) 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
41.1-4 State  list pertaining to taxation 
 
State Government has exclusive powers to make laws in respect of matters in List II of Seventh Schedule to 
our Constitution. These entries include Police, Public Health, Agriculture, Land, water supplies etc. 
Entries in this list relevant to taxation provisions, as amended w.e.f. 16-9-2016. are as fo lows: 
 
Entry  No. 33 - Theatres and dramatic performances; cinemas subject to provisions of Entry 60 of List I; 
sports, entertainments and amusements 
 
Entry No. 34 - Betting and gambling 
 
Entry  No. 45 - Land revenue, including the assessment and co lection of revenue, the maintenance of land 
records, survey for revenue purposes and records of rights, alienation of revenues. 
Entry No. 46 - Taxes on agricultural income. 
 
Entry No. 47 - Duties in respect of succession to agricultural land 
 
Entry No. 48 - Estate duty in respect of agricultural land 
 
Entry No. 49 - Taxes on lands and buildings 
 
Entry No. 50 - Taxes on mineral ri ghts subject to any limitations imposed by Parliament by law relating to 
mineral development. 
Entry  No.  51  -  Duties  of excise  on the  fo lowing  goods  manufactured  or  produced  in the  State  and 
countervailing duties at the same rate or lower rates on similar goods manufactured or produced elsewhere in 
India - (a) alcoholic liquors for human consumption (b) opium, Indian hemp and other narcotic drugs and 
narcotics - - but not including medicinal and toilet preparations containing alcohol or any substance included in 
sub-paragraph (b) of this entry. 
Entry No. 52 - Omitted [Ti l 16-9-2016 the entry was as follows - Tax on entry of goods into a local area for 
consumption, use or sale therein (usually called Octroi or Entry tax). 
Entry No. 53 - Taxes on the consumption or sale of electricity. 
 
Entry No. 54 - 'Tax on sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), 
natural gas, aviation turbine fuel and alcoholic liquor for human consumption,  but not including sale in the 
course of inter-state trade or commerce or sale in the course of international trade or commerce of such goods 
[Ti l 16-9-2016 the entry was reading as follows - Tax on sale or purchase of goods other than newspaper, 
subject to the provisions of entry 92A of List I (i.e. except tax on inter-state sale or purchase]. 
Entry  No. 55 -  Omitted  [Ti l 16-9-2016  the entry was as follows -  Tax on advertisements  other than 
advertisements in newspapers and advertisements broadcast by radio or television]. 
Entry No. 56 - Tax on goods and passengers carried by road or in inland waterways. 
 
Entry No. 57 - Taxes on vehicles, whether mechanica ly prope led or not, suitable for use on roads, including 
tramcars subject to the provisions of entry 35 of List III (The principles  on which tax on mechanically 
propelled vehicles is concurrent subject under Entry 35 of List III). 
Entry No. 58 - Taxes on animals and boats. 
 
Entry No. 59 - To ls. 
 
Entry No. 60 - Tax on professions, trades, ca lings and employment. 
 
Entry No. 61 - Capitation taxes. 
 
Entry No. 62 - Tax on entertainment and amusements to the extent levied and co lected by a Panchayat or a 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Municipality or a Regional Council or a District Council [Ti l 16-9-2016 the entry was reading as follows - 
Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling]. Simultaneously, para 
8(3)(e)  has  been  inserted  in  Sixth  Schedule  to  Constitution  as  follows  'taxes  on  entertainment  and 
amusements'. Sixth Schedule to Constitution of India contains provisions for administration of Tribal Areas in 
State of Assam, Meghalaya, Tripura and Mizoram. Under the provisions of this Schedule, District Councils 
are constituted for each autonomous district. 
Entry No. 63 - Rates of stamp duty in respect of documents other than those specified in the provision of List 
I with regard to rates of stamp duty. 
 
Entry No. 66 - Fees in respect of any of the matters in this List (i.e. List II), but not including fees taken in 
any court. 
41.1-5 Concurrent list 
 
List III of Seventh Schedule, ca led "concurrent  list", includes matters where both Central Government and 
State Government  can make laws. This list includes entries like Criminal Law and Procedure,  Trust and 
Trustees, Civil procedures, economic and social planning, education, boilers, electricity, newspapers, forests, 
social security,  labour  welfare,  weights  and  measures,  trade  unions,  charitable  institutions,  price  control, 
factories, etc. 
There are only two entries relevant to taxation in this List. 
 
Entry No. 44 - Stamp duties other than duties or fees co lected by means of judicial stamps, but not including 
rates of stamp duty. 
Entry No. 47 - Fees in respect of any of the matters in this List (i.e. List III), but not including fees taken in 
any court. 
41.1-6 Amendment to empower Union and States  to levy GST 
 
Article  246A in Constitution of India  has been inserted  w.e.f.  16-9-2016  to give concurrent  powers  to 
Parliament and legislature of each State to make laws with respect to goods and service tax imposed by the 
Union or by such State. 
For this purpose, 'State' will include 'Union territory with legislature'- Article 366(26B) of Constitution of India 
[This will cover Delhi, Chandigarh and Puducherry]. 
 
As per Article 246(2) of Constitution of India as amended w.e.f. 16-9-2016, Parliament will have exclusive 
powers to make laws with respect of goods and services tax where the supply of goods, or of services, or 
both takes place in the course of inter-state trade or commerce. 
Explanation to Article 246 of Constitution of India states that GST on inter-state supply of petroleum crude, 
high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation and turbine fuel shall take 
effect from the date recommended by GST Council. 
Article 248 of Constitution of India as amended  w.e.f. 16-9-2016  provides  that Parliament  will have a l 
residuary powers to make laws, including taxation, but subject to Article 246A of Constitution of India (which 
confers concurrent powers of Union and States to levy GST). 
Thus, Parliament will not have powers in respect of State GST. 
 
Article 250 of Constitution of India is amended to provide for emergency powers of Parliament to make laws 
for whole or part of India, with respect to GST. 
Definition   of  'goods'  -  'Goods'  include  a l materials,  commodities  and  articles  -  Article  366(12)  of 
Constitution of India. 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
This is inclusive definition. It should cover a l tangible and intangible movable property. 
 
Definition  of Services - 'Services' means anything other than goods - Article 366(26A) of Constitution of 
India w.e.f. 16-9-2016. 
 
This is very broad definition. Even immovable property can get covered in this definition. 
 
41.1-7 Parliament to formulate principles for determining place of supply of goods 
 
Parliament may, by law, formulate principles for determining (a) place of supply of goods or services (b) when 
supply of goods or services or both are in the course of inter-State trade or commerce -Article 269A(2) of 
Constitution of India inserted w.e.f. 16-9-2016. 
41.2 Deemed sale of goods under Constitution 
 
In addition to the aforesaid provisions, Constitution of India contains concept of 'deemed sale', which was 
intruded mainly for purpose of levy of sales tax/Vat on goods by State Government. 
Article 366(29A) of Constitution of India, as amended by Constitution (46th Amendment) Act, 1982, w.e.f. 
2-2-1983 states as follows : 
 
'Tax on the sale or purchase of goods' includes — 
 
(a)   a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, 
deferred payment or other valuable consideration 
(b)   a tax on the transfer of property in goods (whether as goods or in some other form) involved in the 
execution of a works contract 
(c)   a tax on the delivery of goods on hire-purchase or any system of payment by instalments 
(d)   a tax on the transfer of the ri ght to use any goods for any purpose (whether or not for a specified 
period) for cash, deferred payment or other valuable consideration 
(e)   a tax on supply of goods by any unincorporated association or body of persons to a member thereof 
for cash, deferred payment or other valuable consideration 
(f)  a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of 
goods,  being food  or  any other  article  for  human  consumption  or  any drink  (whether  or  not 
intoxicating), where such supply or service, is for cash, deferred payment or other valuable 
consideration, 
And such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person 
making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, 
delivery or supply is made. 
This definition not being omitted - It is interesting to note that this definition has not been omitted. 
 
41.2-1 Concept of deemed sale of goods continuing under GST 
 
Interestingly, concept of deemed sale of goods is continuing under GST regime also. It is not clear what this 
provision is being continued, when the distinction between goods and services is being abolished. 
41.3 Restrictions on powers of taxation 
 
Restrictions on power of State Government on imposition of tax on supply of goods and services are provided 
in Article 286 of Constitution of India, as follows : 
 
?   State Government cannot impose tax on supply of goods or services or both during imports or 
exports; or tax on sale outside the State. [Article 286(1) of Constitution of India] [The words in