Part XII - Finance & Property • Article

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

Article 269 mandates that taxes on the inter-state sale or consignment of non-GST goods (like crude oil or petroleum products) are levied and collected by the Central Government, but are entirely assigned and distributed to the States where the trade takes place as per rules set by Parliament.

Official Text

[(1) Taxes on the sale or purchase of goods and taxes on the consignment of goods [except as provided in article 269A] 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.]

Simple Meaning

Explain Like Ten

If a factory in one state sends goods to another state, the central government collects a tax on that movement. But the central government does not keep this money; they hand it over to the states according to fair rules.

Student Mode

Article 269 governs the distribution of taxes on inter-state sale/purchase of goods (except newspapers) and consignment of goods. These taxes are levied and collected by the Union under Entry 92A and 92B of the Union List, but the proceeds do not go to the Consolidated Fund of India. Instead, they are assigned to the States in accordance with principles formulated by Parliament by law.

Example

If a refinery in Assam sells crude petroleum to a buyer in Bihar, the inter-state trade tax is collected by the Union under Article 269 but is given entirely to the states based on distribution guidelines set by Parliament.

Key Takeaway

The Union levies and collects taxes on inter-state sale/consignment of non-GST goods, but distributes all proceeds to the States.

FAQs

How does Article 269 relate to the Central Sales Tax (CST) Act, 1956?

The CST Act was enacted by Parliament under the authority of Article 269 to govern inter-state sales taxation and specify the principles of distribution.

What is excluded from Article 269 since the 101st Amendment, 2016?

All goods and services that fall under the GST regime are excluded from Article 269 and are instead governed by the new Article 269A.

Quiz

Under Article 269, who determines the principles of distribution of inter-state trade tax among the states?

Answer: Parliament by law

Which of the following is explicitly excluded from the scope of Article 269?

Answer: Goods covered under Article 269A (GST)