Article 246A

Article 246A of the Constitution of India represents a pivotal constitutional reform introduced through the Constitution (One Hundred and First Amendment) Act, 2016. It provides a special legislative framework empowering both Parliament and State Legislatures to make laws concerning the Goods and Services Tax (GST). This article was crafted to establish the constitutional foundation for India’s shift to a unified indirect tax system.

Background

Before the introduction of Article 246A, legislative powers over taxation were distributed between the Union and the States through Article 246, read with the Seventh Schedule of the Constitution. The Union List authorised Parliament to legislate on matters of central taxes such as excise duty and service tax, while the State List empowered States to levy taxes like value-added tax (VAT) and entry tax. However, the multiplicity of indirect taxes created overlapping jurisdictions, cascading effects, and inefficiencies in the tax system.
The implementation of the Goods and Services Tax required a constitutional amendment because both goods and services were previously taxed under separate heads, divided between the Union and the States. Article 246A was introduced to remove this separation and to enable a concurrent power to legislate on GST for both levels of government.

Text and Scope of Article 246A

Article 246A consists of two clauses.

1. The first clause confers simultaneous powers upon Parliament and State Legislatures to make laws with respect to goods and services tax imposed by the Union or by the States. It begins with a non obstante clause—“Notwithstanding anything contained in Articles 246 and 254”—which ensures that this special provision prevails over the general distribution of legislative powers.
2. The second clause grants Parliament exclusive power to make laws regarding GST on supplies that take place in the course of inter-State trade or commerce.

The article also provides that in respect of GST on petroleum products mentioned in Article 279A(5), the provision shall come into effect on the date recommended by the GST Council.

Purpose and Significance

The primary objective of Article 246A is to constitutionally empower both the Union and the States to levy and collect GST, creating a harmonised tax system throughout the country. It alters the earlier legislative division by introducing a concurrent domain for taxation on goods and services, an area previously kept distinct.
Key purposes include:

• Establishing a constitutional base for a comprehensive GST covering both goods and services.
• Eliminating the duality in taxation powers that existed between the Union and the States.
• Granting exclusive legislative authority to Parliament for inter-State supplies to ensure national uniformity.
• Providing constitutional legitimacy to the principle of “one nation, one tax.”

Legislative Power and Federal Balance

Article 246A brings a distinctive approach to Indian federalism by creating a simultaneous power structure. While earlier constitutional design relied on distinct spheres of legislative authority, this article introduces an overlapping jurisdiction, allowing cooperative governance between the Centre and the States.

• For intra-State supplies, both the State Legislature and Parliament can enact laws—leading to the Central GST (CGST) and State GST (SGST).
• For inter-State supplies, only Parliament can legislate, resulting in the Integrated GST (IGST).

This framework ensures that indirect taxation operates seamlessly across State boundaries, while retaining fiscal autonomy for individual States.

Key Features

• Concurrent legislative competence for GST within States.
• Exclusive Union competence for inter-State trade and commerce.
• Overriding power over Articles 246 and 254, ensuring the special nature of GST legislation.
• Linkage with Article 279A, which establishes the Goods and Services Tax Council responsible for harmonising tax rates and structures.
• Comprehensive coverage of goods and services under a single tax umbrella, reducing multiplicity.

Advantages

• Provides a uniform tax structure throughout the country, minimising tax barriers between States.
• Reduces the cascading effect of taxes by subsuming multiple indirect taxes under one regime.
• Simplifies compliance and administration for both businesses and governments.
• Encourages cooperative federalism through shared taxation powers.
• Enhances transparency and ease of doing business by unifying tax laws across sectors and regions.

Criticisms and Challenges

Despite its advantages, Article 246A has attracted some criticism and interpretative challenges.

• The expression “with respect to” in Article 246A is broad and may include ancillary matters such as offences, penalties, and procedures, leading to questions on legislative competence in certain cases.
• The division between intra-State and inter-State transactions sometimes becomes complex, particularly regarding place-of-supply rules, which determine jurisdiction.
• Coordination between the Union and the States in framing and amending GST laws can lead to administrative and policy challenges.
• States may occasionally express concern over fiscal autonomy due to the centralised role of the GST Council.

Constitutional Relationship with Other Articles

Article 246A functions in harmony with other constitutional provisions introduced by the 101st Amendment:

• Article 269A deals with the levy and collection of GST on inter-State supplies and the apportionment of such revenue between the Union and the States.
• Article 279A establishes the Goods and Services Tax Council, which recommends tax rates, exemptions, and thresholds.
• Amendments to Articles 248, 249, 250, 268, and 270 were made to align fiscal provisions with the GST framework.

Together, these changes created a new fiscal structure aimed at simplifying and unifying the indirect tax system while respecting India’s federal principles.

Implications for Indian Federalism

Article 246A has transformed India’s fiscal federalism from a rigidly divided system into one based on cooperation and coordination. It encourages shared responsibility in tax administration and policy formulation through the GST Council. The model represents a balance between fiscal unity and federal diversity, enabling uniformity in taxation without entirely eroding State autonomy.