What is Article 269 of Indian Constitution – Defination & Meaning

Article 269: Taxes levied and collected by the Union but assigned to the States (1) Taxes on the sale or purchase of goods and taxes on the consignment of
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Article Number

269

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Part XII – Finance, Property, Contracts and Suits

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Bare Acts Text

Article 269: Taxes levied and collected by the Union but assigned to the States

  • (1) Taxes on the sale or purchase of goods and taxes on the consignment of goods shall be levied and collected by the Government of India but shall be assigned and shall be deemed to have been assigned to the States on or after the 1st day of April, 1996 in the manner provided in clause (2).
  • Explanation. — For the purposes of this clause, —
  • (a) the expression “taxes on the sale or purchase of goods” shall mean taxes on sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce;
  • (b) the expression “taxes on the consignment of goods” shall mean taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce.
  • (2) The net proceeds in any financial year of any such tax, except in so far as those proceeds represent proceeds attributable to Union territories, shall not form part of the Consolidated Fund of India, but shall be assigned to the States within which that tax is leviable in that year, and shall be distributed among those States in accordance with such principles of distribution as may be formulated by Parliament by law.
  • (3) Parliament may by law formulate principles for determining when a sale or purchase of, or consignment of, goods] takes place in the course of inter-State trade or commerce.
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Full Definition & Explanation

Article 269 of the Indian Constitution defines how certain taxes are handled in India. Specifically, it states that taxes on the sale or purchase of goods and taxes on the consignment of goods are collected by the central government. However, these taxes are assigned to the states, meaning that the states receive the revenue generated from these taxes. This arrangement helps ensure that states have their own revenue sources even when the central government is responsible for collecting taxes. This setup was put into effect on April 1, 1996, providing states with more financial independence and the ability to fund local services and development projects. The article outlines what these taxes include, excluding newspapers, and specifies that they apply to inter-State trade or commerce. For instance, if a company sells products across state lines, the taxes collected from that sale are assigned to the respective states. This means that states can benefit from the economic activities taking place within their borders, which is key for local governments to provide necessary services to citizens. Additionally, it helps promote fair competition among states, as they can rely on these tax revenues to support their economies. Also, Article 269 allows Parliament to create laws that determine the principles for when a sale, purchase, or consignment happens in the course of inter-State trade. This law-making power ensures clarity and consistency in how these taxes are applied. By establishing clear guidelines, Parliament enables states to better manage their tax revenues and address their unique economic needs. Overall, Article 269 plays a critical role in the financial management of states, promoting economic growth and equitable distribution of resources across the nation.

Historical Context

Article 269 was added to the Constitution as part of the 73rd Amendment in 1992, which aimed to enhance the financial autonomy of states. During the Constituent Assembly debates, members emphasized the need for a clear tax distribution framework to ensure that states could manage their finances effectively. This amendment was key to resolving conflicts regarding tax revenues between the central and state governments. The Supreme Court has dealt with key cases regarding tax assignments, including the landmark case of ‘State of Karnataka v. Union of India’, which clarified the distribution of taxes and revenue-sharing principles. Amendments have been made to further streamline tax collection and distribution mechanisms, helping states thrive economically.

Key Features

– Taxes on goods sales are collected by the central government for distribution.
– States receive the revenue from these taxes for local development purposes.
– The definition excludes newspaper sales from being taxed under this article.
– It specifically applies to inter-State trade, increasing state revenues effectively.
– Parliament can establish laws to determine principles for tax distribution.

Importance & Impact

– States gain financial independence by receiving assigned tax revenues for growth.
– The central government collects taxes, while states benefit from the resulting revenue.
– This article encourages healthy competition among states for economic development.
– It supports local governments in funding key services and developmental projects.
– Parliament ensures clarity in tax applications through well-defined legislative guidelines.

Sample UPSC Question

Consider the following statements regarding Article 269 of the Indian Constitution: A. It mentions taxes on all goods including newspapers. B. The revenue from these taxes is assigned to the states. C. Parliament can determine principles for tax distribution. D. It was added as part of the 74th Amendment. Which of the above statements are correct? Explain your answer.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer

The correct answer is B and C only. Article 269 ensures that revenue from specific taxes is assigned to states, while Parliament has the authority to set distribution principles. A is incorrect because newspaper sales are excluded, and D is wrong since Article 269 is part of the 73rd Amendment.

Key Takeaways

✓ Article 269 allows states to receive specific tax revenues directly.
✓ The central government collects taxes, benefiting local state economies.
✓ This article excludes newspaper sales from taxable goods categories.
✓ Parliament can create laws for determining tax distribution principles.
✓ It supports local economic growth through assigned tax revenue generation.

FAQs

Article 269 of the Indian Constitution defines how certain taxes are handled in India. Specifically, it states that taxes on the sale or purchase of goods and taxes on the consignment of goods are collected by the central government. However, these taxes are assigned to the states, meaning that the states receive the revenue generated from these taxes.

For instance, if a company sells products across state lines, the taxes collected from that sale are assigned to the respective states. This means that states can benefit from the economic activities taking place within their borders, which is key for local governments to provide necessary services to citizens. Additionally, it helps promote fair competition among states, as they can rely on these tax revenues to support their economies.

Parliament plays a major role in Article 269 by having the authority to create laws about tax distribution principles. This ensures that there is a clear understanding of what constitutes inter-State trade or commerce. By doing this, Parliament helps in maintaining fairness and clarity in how taxes are applied across different states.

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