The Constitution of India
Article 268
Duties levied by the Union but collected and appropriated by the States
(1) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected,—
(a) in the case where such duties are leviable within any Union territory, by the Government of India, and
(b) in other cases, by the States within which such duties are respectively leviable.
(2) The proceeds in any financial year of any such duty leviable within any State shall not form part of the Consolidated Fund of India, but shall be assigned to that State.
Why this exists
India's Constitution gives the Union power to legislate on certain duties (for uniformity across the country), but recognizes that States need direct revenue. Article 268 balances this by letting the Centre fix the law and rates for specific duties (stamp duties and medicinal/toilet preparation excise), while assigning collection machinery and the actual proceeds to the States. This avoids duplicating tax administration and ensures States get a guaranteed, earmarked revenue stream for locally collected items, reflecting the framers' design of cooperative fiscal federalism under Part XII of the Constitution.
How courts read it
Courts have generally treated Article 268 as a straightforward fiscal-federalism provision defining who levies versus who collects and keeps these specific duties. There is no major landmark case reinterpreting its core mechanics, though courts have referred to it while distinguishing it from Article 269 (taxes levied and collected by the Union but assigned to States) and Article 270 (shared taxes), to clarify the different models of Centre-State revenue sharing under the Constitution.
Common misconceptions
- Myth: Article 268 means the Central Government keeps this tax money since it made the law.
Fact: The Article specifically says money collected within a State does NOT go to the Centre's fund — it stays with that State. - Myth: Article 268 covers all excise duties.
Fact: It only covers stamp duties and excise duties specifically on medicinal and toilet preparations, as listed in the Union List — not general excise duties.