This article aims to give a review about Law of Taxation and
The constitution has supreme power it sets the structure that democrates
political code, fundamental right, procedures, powers, duties of government ,
duties of citizens , directive principles, Constitution has power to authorize
all the laws in India.
Parliament and state legislature get power to execute various law from
Whereas tax is the sum imposed by the government on citizens and enterprises and
taxation law deals with the rules and regulations that set down that when and
how much tax should be paid to local, state and federal authorities.
It is the most important ingredient for the country which keeps the revenue
consistent and helps in growth of economy.
Article 265 to Article 289 of constitution deals with the provision of tax.
Article 265 says that no tax shall be levied or collected except by the
authority of law , tax levied must be within the legislature power.
All the matters related to tax are mentioned in the 7th schedule which consists
3 lists namely Union, State and Concurrent list. It defines and allocate the
power between Union and State.
Meaning of tax
Tax is the most important sources of revenue for government. It is the sum
imposed by government on citizens and enterprises. It is important for growth of
Every government imposes two kinds of taxes:
- Direct tax
- Indirect tax
Characteristics of TaxTax is a compulsory contribution
A tax is a compulsory payment to government from citizens without expectation of
any direct return. As it is a compulsary contribution no one can refuse to pay
it on the ground that he or she does not get any benefit from government
Taxes are levied by government
Only government has right to impose and collect taxes in the country , no one
other than government has this authority.
Tax is collected for the common benefit
The tax collected by the government is used for the common benefit of all the
The main purpose of collecting tax is to fulfill social needs such as health,
education, building of bridges and roads etc.
Burden on individual to pay tax
No one can force a person to pay tax except government. If a person's income is
above the exemption limit than only he is bound to pay tax and if it is below
the exemption limit than he cannot be forced to pay tax on income.
Significance of Taxation
- Taxes are used to pay for the public goods and services , that used by
individuals in their daily life.
- Taxes are used to provide basic facilities like primary education ,
affordable housing and subsidies
- Taxation plays a significant role to built the economy without taxation
it is not possible to run the country.
Constitutional Provisions relating to tax
Constitutional provisions of taxation are referred under article 265 to article
No tax shall be levied or collected except by the authority of law, levy of
taxes must be within the legislative power.
- No presumption in levy of tax , for levy of tax fiscal statute must be
read as whole.
This article talks about consolidated funds and Public accounts of India and the
states. Consolidated funds are those funds in which all the reciepts of
government of India are credited like tax, loans taken , treasury bills , etc.
All expenditure of government of India is done from consolidated fund of India
from which money is appropriated after the permission of parliament.
- Public account funds
- Funds which are not credited in consolidated funds are credited to
public account funds.
- This includes remmmitances , provident fund desposits and so on. This
account can be made without parliamentary authorisation , such payments are of
executive in nature such as banking transaction.
Contigency funds are maintained by president and held by finance secretory on
behalf of president. Such funds are used at the time of emergency such as
natural calimities and crises like floods, tsunamis and earthquake.
Under this article it is explained that the duties levied by the Union but they
are collected and appropriated by the states. For eg. Stamp duties, excise
duties on medical and toilet preparations.
The proceeds in any financial year of any such duty leviable within any state
shall not form part of the consolidated fund in India, but shall be assigned to
Taxes levied and collected by central government but assigned to the states.
According to clause (2) these taxes are namely:
- Duties in respect of succession to property other than agriculture land
- Estate duty in respect of property other than agricultural land.
- Terminal taxes on goods or persons carried by railway , port or
- Taxes on railway fares and freights.
- Taxes other than stamp duties on transactions in stock exchanges and
- Taxes on the sale or purchase of newspaper and on advertisements
- Taxes on the sale or purchase of goods other than newspaper where such
sale or purchase takes place in the course of interstate trade or commerce.
- Taxes on consignment of goods.
101st amendment act in 2016
- Levied and collection of gods and services tax in course of interstate
trade or commerce
- Goods and services tax is collected and levied by central government of India.
- It is not the part of consolidated fund rather it is divided into union and
state on the basis of the law made by parliament on the recommendation of GST
This article talks about those taxes which are levied and distributed between
union and state except A- 268, 269 and 269 A.,
Surcharge on taxes and duties in article 271 and cess levied for specified
purpose under any law made by parliament, these all are not part of CFI and they
are divided on the basis of finance commission on recommendation of president.
Cess and Surcharge
Cess is a tax on tax. It is described under article 270 of constitution of India
it is also called subtax. Cess is for a specific purpose and the amount of cess
goes to consolidated fund of India.
For eg; Educational cess and Swachh Bharat cess etc.
Surcharge is also tax on tax , it is levied on specific limit usually higher
income groups. Amount of surcharge is also goes to CFI , surcharge is not levied
for specific purpose but it is levied on specified people mainly higher income
Grants in lieu of export duty on jute and jute products in states Assam, Bihar,
Orissa, and West bengal and this grant shall be charged on the consolidated fund
of India (CFI)
Talks about te taxes in which states are interested such as agricultural income,
for that prior recommendation of president is required to bills affecting
taxation in which states are interested.
Talks about that grants from Union to State for schemes and developments ,
welfare of SC and ST and thirdly that administration development of autonomous
district of Assam.
The sixtieth amendment act of constitution of India amended article 276.
The article talks about that the extra taxes are levied on profession, trades
and callings and employements and the limit of these taxes are Rs.2500.
Talks about that any taxes, duties , cesses or fees immediately before the
commencement of the constitution, were being lawfully levied by the government
of any state or any municipality or any other local authority may nowithstanding
that those taxes, duties and cesses or fees are mentioned in the Union list
continue to be levied by the same purpose until the provision to the contarery
has been made by Parliament by law.
Talks about calculation of net proceeds and its partition here net proceeds are
actual amount after deducting the cost inferred from the collection of Tax. And
this amount apportioned between union and state.
The article defines GST council clause 1 of the article says that when the 101
amendment passes president constitutes a council namely GST council.
The chairperson of that council will be the union finanace minister and the
union ministers of state in charge of revenue of finance is the member, the
minister in charge of finance or taxation or any other minister nominated by
each state governments are the members.
The council can give the recommendation on cess, tax , surcharge levied by the
union and state and other local bodies, the goods and services that may be
exempted from the GST.
GST laws and on what basis it is decided and appointment principles and
threshold limit of turnover, baserate, special rate for the special purposes
like for natural calamity or special provisions on respect of hilly areas or
northeast states. ( Arunachal Pradesh, Mizoram, Kashmir, Manipur, Meghalya,
Nagaland ,Uttrakhand and Himachal Pradesh)
GST council shall recommend the date on which the goods and services tax shall
be levied on petroleum , crude oil, high speed diesel, natural gas, viation
The Union or a state may make any grants for any public purpose ,
notwithstanding that the purpose is not one with respect to which Parliament or
the Legislature of the state , as the case may be, may make laws.
State cannot authorize the imposition of tax on supply of goods and services ,
where such supply takes place outsnNide the state or where the export of the
goods and services takes place out of territory of India.
Parliament by law formulate principles for determining when a supply of goods
and services takes place in any way mentioned in clause (1)
This article talks about exemption of property and income of state from union
- The property and income of state are exempted from union taxation.
Nothing in Clause (1) shall prevent the Union from imposing or authorizing the
imposition of , any tax to such extent , if any , as Parliament made by law
provide in respect of a trade or business of any kind carried on by or on
behalf of the government of a state , or any operations connected therewith ,
or any property used or occupied for the purpose of such trade or business or
any income accruing or arising in connection therewith.
Seventh schedule to constitution
Seventh schedule deals with division of subjects for powers and responsibilities
in Union , State and Concurrent list.
Seventh schedule has three types of list
Union list [Article 246 (1)]Under this list Parliament authorised to make laws as per list 1 of seventh
State list [ Article 246(3)]Under this list state is authorised to make laws as per the list two of
Concurrent listUnder this list both Union and State are authorised to make law.
Distribution of Taxation Power
Central government, State government, local government get power to impose tax
from Indian Constitution.
Article 245 and Article 246 deals with distribution of Taxation power.
Article 245 of constitution is extent of law made by parliament and by
legislature of state, both the government have right to make laws. These are
provided by constitution itself , these subject matters provided in 7th schedule
of Indian constitution.
According to article 245 subject to provision of this constitution , Parliament
may make laws for whole or any part of the territory of India and legislature
can make law for any part of the State.
Article 246 is related to the distribution of subject matters on which central
government or state government can make laws. It must be read with the
7th schedule of constitution.
Taxation system in India
Taxes plays contribution in total revenues. The Indian tax system is called
three tier federal structure which includes, cental government, state government
and local municipal body.
No one can levy or collect the tax without the permission of law.
Role of centre and state government in Indian Taxation system
Tax on custom duties, income tax service tax, cental excise duty is collected by
Income tax on agricultural products, professional tax , VAT, state excise duty,
land revenue, stamp dutiesare collected by state government, octroi, property
tax, water and drainage are also collected by state government.
Types of taxes
Written By: Pragya Saini
Direct taxIt is paid by the person on whom it is legally imposed, the impact of money
burden and incidence are on the same person , direct tax cannot be shifted to
another person. For eg; Income tax, wealth tax, house tax, salaries, capital
Indirect taxesit is imposed on one person , but paid partly or wholly by another person.
The impact and the incidence of tax are on different person, indirect taxes can
be shifted or passed on to another person eg GST , excise duty
BBALLB 6TH Sem Chandigarh University.