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Taxation Laws

Distribution of Taxing Powers: Articles 246, 246A and 248

Article 265 requires a law; the distribution of legislative powers decides which legislature may make it. The Constitution separates taxing powers from general legislative powers and allocates them through specific tax entries in Lists I and II. The 101st Amendment added Article 246A, giving Parliament and the States a concurrent power to levy GST. Whatever is left falls to Parliament as residuary power. This note covers the scheme and the principles courts apply to it.

1. The Lists and the Tax Entries

Taxing powers under the Seventh Schedule and Article 246A

Figure 1: Taxing powers under the Seventh Schedule and Article 246A

  • Article 246. Parliament legislates on List I, State Legislatures on List II, and both on List III.
  • List I. Union tax entries include income other than agricultural income (82), customs (83), excise on specified petroleum products and tobacco (84), corporation tax (85), the capital value of assets (86), and taxes on inter-State sales (92A)
  • List II. State tax entries include land revenue (45), agricultural income (46), lands and buildings (49), mineral rights (50), excise on alcoholic liquor for human consumption (51), electricity (53), sales of specified petroleum products and liquor (54), and taxes on vehicles, tolls, professions and local entertainment (56 to 62)
  • List III. There is no general power to tax in the Concurrent List; it covers stamp duties other than judicial stamps but not their rates (44), and fees (47)

2. Article 246A: The GST Power

  • Article 246A(1). Parliament and the Legislature of every State have power to make laws on goods and services tax imposed by the Union or that State.
  • Article 246A(2). Parliament has exclusive power over GST where the supply takes place in the course of inter-State trade or commerce.
  • Article 269A. GST on inter-State supplies is levied and collected by the Union and apportioned between the Union and the States as Parliament provides on the recommendation of the GST Council.
  • Effect. Article 246A is a special provision that operates notwithstanding Articles 246 and 254, creating a simultaneous power rather than one subordinate to the Lists.

3. What the 101st Amendment Changed

Constitution (One Hundred and First Amendment) Act, 2016

Figure 2: Constitution (One Hundred and First Amendment) Act, 2016

The 101st Amendment subsumed most indirect taxes into GST. In List I, Entry 84 was confined to excise on petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and tobacco, and Entries 92 (newspapers and advertisements) and 92C (services) were omitted. In List II, Entries 52 (entry tax) and 55 (advertisements) were omitted, Entry 54 was confined to sales of the same petroleum products and alcoholic liquor for human consumption, and Entry 62 was limited to entertainment taxes levied by local bodies.

4. Principles Courts Apply

Interpreting the tax entries

Figure 3: Interpreting the tax entries

  • Separate fields. In M.P.V. Sundararamier v State of A.P. (1958), the Supreme Court held that the Lists distinguish general subjects of legislation from fields of taxation; power to tax must be found in a tax entry.
  • Residuary power. In Union of India v Harbhajan Singh Dhillon (1971), the Court upheld a wealth tax on agricultural land under Parliament's residuary power in Article 248 and Entry 97 of List I.
  • Mineral rights. In Mineral Area Development Authority v Steel Authority of India (25 July 2024), a nine judge bench held by 8 to 1 that royalty is not a tax, that States may tax mineral rights under Entry 50 of List II, and that the Mines and Minerals Act does not limit that power. India Cement (1990) was overruled. A later order of 14 August 2024 allowed the levy only for transactions from 1 April 2005, payable in instalments over twelve years from 1 April 2026.

⚠ Exam trap

Taxing power comes only from a tax entry, not from a general entry (M.P.V. Sundararamier). List III has no general tax entry. Article 246A gives Parliament and the States concurrent power over GST, with Parliament alone covering inter-State supply. Residuary taxation belongs to Parliament under Article 248 and Entry 97 (H.S. Dhillon). The 101st Amendment omitted Entries 92 and 92C of List I and 52 and 55 of List II. Royalty is not a tax, and States can tax mineral rights (MADA, 2024).

5. Frequently Asked Questions

Which legislature can levy tax on inter-State supply of goods and services?

Only Parliament, under Article 246A(2). The tax is IGST, levied and collected by the Union and apportioned under Article 269A.

Who has the residuary power of taxation?

Parliament, under Article 248 read with Entry 97 of List I, as applied in Union of India v Harbhajan Singh Dhillon (1971).

6. Related Topics

  • Topic 2: No Tax without Authority of Law, Article 265. Why competence matters.
  • Topic 4: Tax and Fee. Fees under the general entries.
  • Topic 26: GST, the 101st Amendment and the GST Council. Article 246A in practice.