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Constitutional Provisions Regarding Taxation

Even though the customs act 1962 regulates the duties and taxation, The Constitution of India provides for the provisions relating to the taxation. Article 265 to Article 289 deals with the constitutional provisions relating to taxation.

Taxation Only By Authority of Law:

Article 265 provides that no tax shall be levied or collected except by the authority of law .No tax can be imposed by an executive order. In the case of Chhotabhai v/s Union Of India, it was held that the law providing for imposition of tax must be a valid law that it should not be prohibited by any provisions of the constitution.

Restriction On The States Taxing Power

The state has like the union, power to levy tax on supply of goods or services or both other than of newspapers. Article 286 however imposes the following restrictions on the state’s power to impose sales tax on goods.
  1. Sale Or Purchase of Goods Which Take Place Outside The State:

    Article 286 (1) (a) prohibits a state to impose a tax on the supply of goods or services or both which take place outside the state.
  2. Sale Or Purchase of Goods In The Course of Import And Export

    Article 286(1)(b) prohibits state to impose tax in the course of import of goods and services or export of goods and services out of the territory of India.

Coffee Board Banglore v/s Joint Coomercial Tax Officer
in this case it was held that there must be a sale the goods must be actually exported and the sale must be part and parcel of export.

State Of Orissa v/s MMTC export of sale become complete only after reaching the destination. Article 287 prohibits state from imposing tax on consumption or sale of electricity supplied to government utilized for constructions, maintenance of railway

Levy of duty or tax:

Article 268 - duties levied by union but collected and appropriated by states. Example :stamps duties mentioned in union list shall be levied by central government but collected by the state .Article 269 deals with taxes levied and collected by the union and assigned to the states that is money collected will not go to the consolidated fund but used and distributed among state in accordance with principle formulated by the parliament. Article 270 deals with the tax levied and collected by the state example: taxes and duties referred in the union list shall be distributed.

Grants In Aid:

  • Article 273 grants in aid will be given to the states of Assam, Bihar and West Bengal in lieu of export of duty on the jute products.
  • Article 275 empowers the parliament to make such grants.
  • Article 275 empowers the parliament to make such grants.
  • Article 282 –both the union and the state makes grant for any public purpose
  • Article 274 deals with the prior recommendations of the president is required to bills affecting taxation in which states are interested

Taxes For The Purpose of State:

Articles 276 and 277 are saving provisions .Article 276 empowers the state to impose taxes on profession, trades, callings and employment for the benefit of state or municipality, district board etc. But the provision of Article 277 does not extend to taxes levied under a law passed after the constitution came into force.

Taxes For The Purpose of The Union:

Article 271 provides that if parliament at any any time increases any of the duties or taxes mentioned in Article 269 and 270 except Article 246A by imposing a surcharge.

At last Article 279 deals with the calculation of net proceeds and Article 284 deals with custody of suitor’s deposits and other moneys received by public servants and courts. These are the constitutional provisions regarding taxation embodied in the constitution. 

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