Part XII - Finance & Property • Article

Article 268 Simplified: Duties levied by the Union but collected and appropriated by the States

Article 268 states that stamp duties on financial transactions (like share transfers, insurance policies, or bills of exchange) specified in the Union List are officially set (levied) by the Central Government, but are collected and kept (appropriated) entirely by the States where the transaction occurs.

Official Text

(1) Such stamp duties 2*** 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.

Simple Meaning

Explain Like Ten

The central government makes the rules about how much stamp tax to charge on things like insurance or stock shares, so the rate is the same everywhere. But the state where you buy these things gets to collect and keep all the tax money.

Student Mode

Article 268 provides a cooperative fiscal arrangement. The stamp duties specified in the Union List (Entry 91, e.g., on share transfers, bills of lading, promissory notes) are levied by the Union to maintain national uniformity. However, except for Union Territories, they are collected and retained by the respective States where the duties are leviable. These proceeds do not enter the Consolidated Fund of India.

Example

When you buy an insurance policy in Maharashtra, the stamp duty rate is determined centrally by Parliament under Article 268, but the Maharashtra state government collects and keeps the tax proceeds as its own revenue.

Key Takeaway

The Center sets uniform rates for stamp duties on key commercial instruments, but States collect and retain the revenue.

FAQs

Why does the Union levy stamp duties under Article 268 if the States get to keep the revenue?

To ensure a uniform rate of stamp duty on commercial transactions of national importance (like share transfers or bills of exchange) across all states.

Were excise duties on medicinal and toilet preparations previously under Article 268?

Yes, but they were omitted and merged into the GST regime by the 101st Constitutional Amendment Act, 2016.

Quiz

Under Article 268, who has the power to LEVY the stamp duties mentioned in the Union List?

Answer: The Union Government (Parliament)

The proceeds of stamp duties collected under Article 268 within a State:

Answer: Are retained entirely by that State