One Hundred and First Amendment of the Constitution of India

The One Hundred and First Amendment of the Constitution of India, officially titled The Constitution (One Hundred and First Amendment) Act, 2016, introduced the Goods and Services Tax (GST)—a landmark reform that overhauled India’s indirect taxation system. Enforced on 1 July 2017, the amendment aimed to unify various central and state taxes into a single, comprehensive tax applicable to the supply of goods and services throughout India.
The amendment represented one of the most significant fiscal reforms since India’s independence, replacing a complex web of indirect taxes with a single national market under the dual control of the Centre and States.

Background

India’s pre-GST taxation framework was fragmented and multilayered, involving multiple levies by both the Union and State Governments. Taxes such as excise duty, service tax, value-added tax (VAT), octroi, entry tax, luxury tax, and entertainment tax often overlapped, creating cascading effects (tax on tax), administrative complexities, and reduced economic efficiency.
The idea of a unified tax system first emerged under Prime Minister Atal Bihari Vajpayee’s administration, which established an Empowered Committee of State Finance Ministers to design a framework for GST and to develop supporting information technology infrastructure.
Later, in his 2006 Budget Speech, Finance Minister P. Chidambaram formally announced a target of 1 April 2010 for implementing GST and initiated further consultations with the states. In 2009, the Empowered Committee released the First Discussion Paper on GST in India, proposing a dual model—one component to be levied by the Centre (CGST) and the other by the States (SGST).
Subsequently, multiple technical and legislative working groups were set up to prepare draft laws and define processes for implementation. The Empowered Group on IT Infrastructure, chaired by Dr. Shruti Negi, was tasked with developing the technology backbone necessary for the nationwide rollout of GST.

Legislative Process and Enactment

The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 was introduced in the Lok Sabha on 19 December 2014 by Arun Jaitley, then Union Minister of Finance.

• Referred to the Select Committee: 14 May 2015 (Rajya Sabha)
• Select Committee Report Submitted: 22 July 2015
• Passed by Rajya Sabha: 3 August 2016
• Passed by Lok Sabha: 8 August 2016
• Assented to by President Pranab Mukherjee: 8 September 2016
• Came into Force: 1 July 2017

Because GST affected the fiscal powers of both the Union and the States, the amendment required ratification by at least half of the State Legislatures under Article 368(2) of the Constitution.
The Assam Legislative Assembly was the first to ratify the Bill on 12 August 2016. Subsequently, it was ratified by a majority of states including Bihar, Gujarat, Telangana, Maharashtra, Kerala, Tamil Nadu, Karnataka, and West Bengal, among others.

Key Constitutional Provisions Introduced

The One Hundred and First Amendment inserted and modified several articles and schedules to provide a constitutional framework for GST.
1. Insertion of Article 246A – Special provision for GST

• Empowers both Parliament and State Legislatures to make laws concerning GST imposed on goods and services.
• The Union Government has exclusive powers to levy GST on inter-state trade or commerce.

2. Article 269A – Levy and collection of GST in inter-state trade

• Provides that inter-state GST (IGST) will be levied and collected by the Government of India, and the proceeds will be shared between the Centre and States, based on recommendations of the GST Council.

3. Article 279A – Constitution of the GST Council

• Establishes the GST Council, a constitutional body chaired by the Union Finance Minister, with:
  • Union Minister of State (Finance) as a member, and
  • Finance/Taxation Ministers of all States as members.
• The Council makes recommendations on key aspects such as:
  • Tax rates, exemptions, and thresholds.
  • Model GST laws and principles of levy and apportionment.
  • Special provisions for certain states (like the North-East and hill states).

4. Amendment to Article 366 – Definition of Goods and Services Tax

• Clause (12A) defines GST as “any tax on supply of goods or services or both, except taxes on the supply of alcoholic liquor for human consumption.”

5. Omission and Substitution of Existing Provisions

• Articles 268, 269, 270, 271, and 286 were amended to remove inconsistencies and align them with the new GST structure.
• Entry 84, 92, and 92C of the Union List and corresponding entries in the State List of the Seventh Schedule were modified or deleted to facilitate the new system.

6. Compensation to States

• A provision was introduced for the Union Government to compensate States for revenue losses arising from the implementation of GST for a period of five years, ensuring smooth transition and fiscal stability.

Structure of GST

The GST introduced a dual model consisting of:

• Central GST (CGST): Levied and collected by the Union Government.
• State GST (SGST): Levied and collected by individual States.
• Integrated GST (IGST): Levied on inter-state transactions, including imports, and collected by the Union Government.

This dual model ensures fiscal autonomy for both levels of government while maintaining uniformity in taxation across India.

Objectives and Advantages

The key objectives behind the introduction of GST were:

• Unification of the Indian Market: To create a single, seamless market across states by eliminating multiple layers of indirect taxes.
• Elimination of Cascading Effect: To prevent “tax on tax” situations that inflated prices and reduced competitiveness.
• Simplification of Tax Administration: To bring transparency, reduce compliance burden, and streamline procedures.
• Boost to Economic Efficiency: To improve logistics, reduce costs, and encourage investment.
• Increase in Tax Compliance: Through an IT-driven system of registration, filing, and payment.

Ratification by States

More than half of the States ratified the Amendment by September 2016. The first was Assam (12 August 2016), followed by Bihar, Jharkhand, Gujarat, Telangana, Chhattisgarh, Maharashtra, Kerala, Karnataka, and West Bengal. Later, Tamil Nadu, Uttarakhand, and Jammu & Kashmir also approved it, making the reform nearly universally accepted across India’s federal structure.

Implementation and Institutional Framework

Following constitutional approval, the Parliament of India enacted the four key laws governing GST implementation:

1. Central Goods and Services Tax (CGST) Act, 2017
2. Integrated Goods and Services Tax (IGST) Act, 2017
3. Union Territory Goods and Services Tax (UTGST) Act, 2017
4. Goods and Services Tax (Compensation to States) Act, 2017

The GST regime officially came into force on 1 July 2017, marking the unification of India’s indirect tax structure.

Significance

The One Hundred and First Amendment has been hailed as a transformative economic reform, comparable to India’s liberalisation of 1991. Its major impacts include:

• Economic Integration: It replaced fragmented state markets with a common national market, enhancing ease of doing business.
• Revenue Efficiency: Broadened the tax base and improved compliance through digital governance.
• Reduction in Logistics Costs: Abolition of interstate check-posts and entry taxes streamlined the movement of goods.
• Consumer Benefits: Led to greater price transparency and reduced overall tax incidence in many sectors.

Challenges and Criticisms

Despite its success, the GST implementation faced certain challenges:

• Technical Glitches: Initial issues with the GST Network (GSTN) IT platform affected compliance.
• Complex Rate Structure: Multiple tax slabs (0%, 5%, 12%, 18%, 28%) have been criticised for complicating administration.
• Revenue Shortfall: Some states expressed concerns about delays in compensation payments.
• Small Business Compliance Burden: Increased reporting requirements initially posed difficulties for small enterprises.

However, continuous reforms, simplifications, and improved digital integration have progressively addressed many of these concerns.

Broader Implications

The amendment reinforced India’s cooperative federalism by balancing fiscal powers between the Centre and States. The GST Council, functioning as a collaborative body, became a new institutional model for intergovernmental fiscal coordination.
It also signified India’s transition towards a modern, consumption-based tax system, aligning the country with global taxation standards.