Article 246A

Article 246A represents one of the most significant constitutional innovations in modern India, introduced through the Constitution (One Hundred and First Amendment) Act, 2016. It redefined the distribution of legislative powers between the Union and the States by creating a special framework for the levy and collection of the Goods and Services Tax (GST). This Article established the constitutional foundation for India’s unified indirect tax system, replacing a complex web of central and state-level taxes with a single, harmonised regime.

Background and Purpose

Prior to the introduction of Article 246A, India’s indirect tax structure was highly fragmented. The Centre levied taxes such as excise duty, service tax, and customs duty, while the States imposed value-added tax (VAT), entry tax, and luxury tax, among others. This multiplicity of taxes created inefficiencies and hindered the free movement of goods and services across state boundaries.
To overcome these challenges and promote economic integration, the Government of India implemented the Goods and Services Tax on 1 July 2017, backed by Article 246A. The new framework was designed to unify the indirect tax system under a dual GST model, ensuring both the Centre and States could levy tax on the same supply within their respective jurisdictions.

Structure and Scope of Article 246A

Article 246A is a special provision that stands apart from the traditional division of legislative powers found in Article 246 and the Seventh Schedule. It introduces a non obstante clause, meaning that it operates notwithstanding anything contained in the earlier provisions regarding legislative competence.
The Article contains two main clauses:

• Clause (1): Grants concurrent power to both Parliament and the State Legislatures to make laws with respect to GST on supplies of goods or services, or both, taking place within a State (intra-State supplies). This forms the basis for the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST).
• Clause (2): Gives Parliament exclusive power to make laws concerning GST on supplies taking place in the course of inter-State trade or commerce (inter-State supplies). This forms the constitutional basis for the Integrated Goods and Services Tax (IGST).

Thus, while Clause (1) establishes concurrent jurisdiction, Clause (2) ensures exclusive central authority over inter-State trade, maintaining a clear demarcation of responsibilities.

Key Features of Article 246A

Article 246A introduces several novel features into India’s constitutional framework:

• Non Obstante Clause: It overrides Articles 246 and 254, giving it precedence over general provisions of legislative competence.
• Concurrent Legislative Power: Both the Centre and the States can legislate simultaneously on the same subject—GST—unlike in the traditional three-list system under the Seventh Schedule.
• Exclusive Power for Inter-State Trade: Only Parliament can legislate on GST concerning inter-State transactions.
• Independence from the Seventh Schedule: Article 246A operates independently of the Union, State, and Concurrent Lists, recognising GST as a unique subject of taxation.
• No Requirement of Presidential Assent: State GST laws do not require the President’s assent unless they conflict with Parliamentary legislation.
• Foundation of Cooperative Federalism: It fosters collaboration between the Centre and the States in designing and implementing GST laws.

The Dual GST Model

Under Article 246A, India adopted a dual GST structure, reflecting the federal nature of governance. The two components of GST are:

• Central GST (CGST) – levied by the Central Government on intra-State supplies.
• State GST (SGST) – levied by the respective State Government on intra-State supplies.
• Integrated GST (IGST) – levied by the Central Government on inter-State supplies, later apportioned between the Centre and the destination State.

This system ensures that both levels of government share revenue equitably while maintaining uniformity in taxation across the country.

Relationship with Other Constitutional Provisions

Article 246A operates alongside several related provisions introduced through the 101st Constitutional Amendment:

• Article 269A: Deals with the levy and collection of GST on inter-State supplies and its apportionment between the Union and the States.
• Article 279A: Establishes the Goods and Services Tax Council, a constitutional body comprising representatives from the Centre and the States, to make recommendations on important aspects of GST such as rates, exemptions, and thresholds.

These Articles collectively form the constitutional architecture of India’s GST regime, ensuring both cooperation and fiscal balance between different levels of government.

Role of the GST Council

The GST Council, created under Article 279A, plays a pivotal role in shaping the practical application of Article 246A. Comprising the Union Finance Minister, Union Minister of State for Finance, and Finance Ministers of all States, the Council:

• Recommends the tax rates, exemptions, and model laws for GST.
• Determines the special provisions for certain goods like petroleum and alcohol, which are currently outside the GST framework.
• Facilitates harmonisation of tax policies across India, ensuring uniformity and preventing revenue disputes.

Although the Council’s recommendations are not legally binding, they serve as the cornerstone of cooperative federalism in fiscal policymaking.

Judicial Interpretation

The judiciary has clarified the scope and spirit of Article 246A in several important decisions:

• Union of India v. Mohit Minerals Pvt. Ltd. (2022): The Supreme Court held that the recommendations of the GST Council are not binding on either the Union or the States. It emphasised that Article 246A envisages a model of cooperative federalism, allowing both levels of government equal status in GST matters. The judgment reinforced the constitutional autonomy of the States within the GST framework.
• Jai Moti Ram v. State of Punjab (2019): The Punjab and Haryana High Court upheld the State Legislature’s competence to enact the Punjab State GST Act, confirming the validity of State GST laws under Article 246A.

These cases underline the balanced and flexible nature of India’s GST framework, where constitutional cooperation replaces hierarchical authority.

Constitutional Significance

Article 246A holds immense constitutional and economic significance:

• It marks the first major departure from the traditional division of powers based on the Seventh Schedule.
• It introduces a shared fiscal responsibility, promoting unity in taxation policy.
• It strengthens India’s fiscal federalism by giving States a decisive role in tax administration and revenue sharing.
• It supports the destination-based principle of taxation, meaning tax revenue accrues to the State where goods or services are consumed rather than produced.
• It simplifies the indirect tax structure, reducing cascading effects and promoting the ease of doing business.

Practical Implications and Impact

The implementation of Article 246A has transformed India’s indirect taxation landscape by:

• Unifying the national market under a single tax regime.
• Streamlining tax compliance through uniform laws and digital infrastructure such as the GST Network (GSTN).
• Enhancing revenue transparency and reducing tax evasion.
• Promoting economic integration and improving inter-State trade efficiency.

Despite initial administrative challenges, GST has become a cornerstone of India’s fiscal policy, balancing revenue needs with ease of compliance.