The Constitution of India
Article 269A
Levy and collection of goods and services tax in course of inter-State trade or commerce
(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.
Explanation.—For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India.
(4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State.
(5) Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.
Why this exists
Article 269A was inserted by the 101st Constitutional Amendment (2016) that created India's GST system. Before GST, the Centre taxed inter-state sales under the old Article 269 (Central Sales Tax) and states taxed local sales separately, creating a patchwork of overlapping taxes and cascading costs. GST reform required a single tax on inter-state supply (Integrated GST or IGST) collected by the Centre but constitutionally designed to flow through to the destination state, since GST is a destination-based tax. This article also enables the technical machinery—like treating imports as inter-state supply and allowing cross-utilization of IGST and State GST credits—needed to make the new one-nation-one-tax system work without violating the Consolidated Fund rules under Articles 266 and 279A.
How courts read it
The Supreme Court's decision in Union of India v. Mohit Minerals Pvt. Ltd. (2022) touched this framework when it examined whether IGST could be separately levied on ocean freight for imported goods under a reverse-charge mechanism, given that the import itself was already taxed as inter-state supply under this article's Explanation. The Court held that such a separate levy amounted to unconstitutional double taxation and, importantly, clarified that recommendations of the GST Council (referenced throughout Article 269A) are persuasive but not binding on Parliament or State legislatures, reinforcing India's cooperative but non-hierarchical federal structure in tax matters.
Common misconceptions
- Myth: IGST is an extra tax added on top of the usual CGST and SGST for inter-state sales.
Fact: IGST replaces the combination of CGST and SGST for inter-state supplies; it's roughly equal to their sum and is later split between the Centre and the destination State, not an additional burden. - Myth: Money collected as IGST belongs to and stays with the Union government.
Fact: Under clause (2), the State's share of IGST is kept out of the Consolidated Fund of India specifically so it can be passed on to the destination State, since GST is meant to be a destination-based tax. - Myth: The GST Council's recommendations mentioned in this article are legally binding orders.
Fact: Courts, notably in Union of India v. Mohit Minerals (2022), have clarified that GST Council recommendations are persuasive and meant to foster cooperation, but Parliament and State legislatures are not constitutionally bound to follow them.