Direct and Indirect Taxation · Concept of Indirect Taxes

Constitutional Provisions on Indirect Taxes and GST

Updated 10 October 2026 · Fact-checked

The Constitution decides who can levy which tax. Article 265 says no tax can be levied or collected without authority of law. Before 2017, the Union and States levied indirect taxes under separate list entries. The 101st Amendment added Article 246A, giving both Parliament and State Legislatures power to make laws on GST.

Understand Constitutional Provisions on Indirect Taxes

India is a federation. The Constitution divides law-making power between the Union and the States through the Seventh Schedule. It has three lists: the Union List (List I), the State List (List II) and the Concurrent List (List III). A tax can be levied only if some entry gives the legislature power to do so.

Article 265 is the basic safeguard: no tax shall be levied or collected except by authority of law. This means two things. A tax needs a valid law passed by the competent legislature. And an executive order or circular alone cannot create a tax. If a tax is collected without such a law, it can be challenged in court.

Before GST, taxing power over goods and services was split. The Union taxed manufacture of goods (central excise), customs duties and, later, services. The States taxed sale of goods (sales tax or VAT), entry of goods into a local area, luxuries, entertainment and similar items. This split caused overlap, cascading of taxes and no credit across the chain.

The Constitution (101st Amendment) Act, 2016 removed this split for GST. It inserted Article 246A, which gives Parliament and State Legislatures concurrent power to make laws on goods and services tax. It also inserted Article 269A for inter-State supply and Article 279A for the GST Council. Several old entries were omitted or changed, such as the Union entry on service tax and the State entry on sale or purchase of goods.

GST did not replace everything. Customs duty on imports and exports stays with the Union. Some State entries continue, for example State excise on alcohol for human consumption. Crude petroleum, high speed diesel, petrol, natural gas and aviation turbine fuel are outside GST until the GST Council recommends a date. They have not yet been brought in. Keep this split of what is inside and outside GST clear.

Key rules to remember

Article 265: No tax shall be levied or collected except by authority of law; Applies to all taxes. Needs a valid law, not an executive order.
Article 246A: Parliament and State Legislatures have power to make laws on GST; Inserted by the 101st Amendment. Parliament has exclusive power where supply is in the course of inter-State trade or commerce.
Article 269A: GST on inter-State supplies (including imports) is levied and collected by the Government of India and apportioned between the Union and the States as provided by Parliament by law on the GST Council's recommendations; Import into India is treated as inter-State trade or commerce.
Article 279A: GST Council makes recommendations on GST matters; Chaired by the Union Finance Minister. Members are Union and State Ministers.
Seventh Schedule lists: List I = Union, List II = State, List III = Concurrent; Use these to decide which legislature could tax a subject before GST.
Amendment Act: The Constitution (101st Amendment) Act, 2016; Enabled GST. Removed overlapping Union and State taxing powers on goods and services.

How to solve Constitutional Provisions on Indirect Taxes questions

Use this method for any question on constitutional basis of indirect taxes.

1Identify what is asked: the source of power, the safeguard, the amendment, or a list entry.
2Start with the basic principle: Article 265, tax needs authority of law.
3Decide whether the question is about the pre-GST or post-GST position.
4For pre-GST, name the list: Union List for central excise, customs and service tax; State List for sale of goods, entry tax, entertainment tax.
5For post-GST, cite Article 246A, then Article 269A for inter-State supplies and Article 279A for the GST Council.
6State what stays outside GST, such as customs duty and State excise on alcohol, if relevant.
7Close with a one-line conclusion linking the provision to the answer.

Quickest way: Article-to-purpose map

When to use it: For MCQs and short notes where you must match a provision to its purpose.

Memorise: 265 = no tax without law; 246A = GST law-making power; 269A = GST on inter-State supplies and imports, levied and collected by the Government of India and apportioned by law on the GST Council's recommendations; 279A = GST Council.
Memorise: 101st Amendment = GST; Seventh Schedule = three lists.
Eliminate options that attribute GST power to only the Union or only the States.
Check the year: the Amendment Act is 2016, GST was implemented in 2017.

Common mistakes in Constitutional Provisions on Indirect Taxes

Saying Article 246A gives only Parliament the power to levy GST.
Students link GST with the Union because of CGST and IGST.
Fix: State that both Parliament and State Legislatures can make laws on GST. Only inter-State supply is exclusively Parliament's.
Confusing Article 265 with Article 246A.
Both are tax-related and numbers look alike.
Fix: Remember 265 is the safeguard: no tax without law. 246A is the GST power.
Writing that the 101st Amendment was passed in 2017.
GST went live in 2017, so the year gets mixed up.
Fix: The Amendment Act is of 2016. GST was implemented in 2017.
Saying all indirect taxes were subsumed into GST.
GST is described as one nation, one tax.
Fix: Customs duty and State excise on alcohol for human consumption continue outside GST.
Placing sale of goods in the Union List.
Students link all goods taxes to the Centre.
Fix: Before GST, tax on sale of goods was a State subject, while excise on manufacture was a Union subject.

Worked examples

Example 1

A State issues an executive circular imposing a new levy on a class of traders with no Act passed. Can it collect the levy? Give reasons.

Show the solution

Identify the principle: Article 265 says no tax shall be levied or collected except by authority of law.
A circular is an executive instruction, not a law passed by the legislature.
A tax must come from a valid law made by a competent legislature under a list entry or Article 246A.
No such law exists here.

Answer: No. The levy lacks authority of law and violates Article 265, so it cannot be validly collected.

Example 2

Explain how the Constitution was changed to enable GST and which powers it gave to the Union and the States.

Show the solution

State the change: the Constitution (101st Amendment) Act, 2016.
Explain the earlier problem: the Union taxed manufacture and services, the States taxed sale of goods, causing overlap and cascading.
Article 246A gives Parliament and State Legislatures power to make laws on GST.
Parliament has exclusive power where the supply is in the course of inter-State trade or commerce.
Article 269A provides that GST on inter-State supplies (including imports) is levied and collected by the Government of India and apportioned between the Union and the States as provided by Parliament by law on the GST Council's recommendations.
Article 279A sets up the GST Council to make recommendations.
Customs duty and State excise on alcohol for human consumption remain outside GST.

Answer: The 101st Amendment inserted Article 246A, with 269A and 279A, giving both levels concurrent GST power and creating a common framework through the GST Council.

Exam tips

Learn the article numbers 265, 246A, 269A and 279A with one-line purposes. MCQs often test these directly.
In written answers, mention the Seventh Schedule and the three lists before explaining the change brought by GST.
Always write the Amendment Act as 101st, 2016. Do not confuse it with the 2017 implementation.
Mention what remains outside GST in long answers. It shows complete understanding.

Practice questions from Concept of Indirect Taxes

Constitutional Provisions on Indirect Taxes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Constitutional Provisions on Indirect Taxes: frequently asked questions

What does Article 246A provide?

It gives Parliament and State Legislatures power to make laws on goods and services tax. Parliament alone has this power for supplies in the course of inter-State trade or commerce.

What does Article 265 say?

It says no tax shall be levied or collected except by authority of law. A tax therefore needs a valid law, not just an executive order.

What was the 101st Constitutional Amendment?

It is the Constitution (101st Amendment) Act, 2016 that enabled GST. It inserted Article 246A, Article 269A and Article 279A and changed several list entries.

Are customs duties covered by GST?

No. Customs duty on imports and exports remains a Union levy outside GST. IGST is also charged on imports in addition to customs duty.