Examining the effect of the Constitution (One Hundred and First Amendment) Act, 2016 on Federalism

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This article was written by Sayanti Chatterjee, a student of HNLU.

The One Hundred and First Amendment of the Constitution of India, officially known as The Constitution (One Hundred and First Amendment) Act, 2016, introduced a national Goods and Service Tax (GST) in India from 1st April, 2017. The GST is a Value added Tax (VAT) and is proposed to be a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services at the national level which will replace all indirect taxes levied on goods and services by a single tax on the supply, right from the manufacturer to the consumer.[1]


The 101st Amendment Act inserts, repeals and amends certain parts of the Constitution.

The following Articles have been inserted

  1. Article 246A[2]: By this Article, the State Legislatures now have power to make individual laws with respect to GST imposed by the Centre and to make necessary arrangements for implementation of the same in intra-state trade, while the Centre has exclusive power to make GST laws in case of inter-state trade. Both the Union and States in India now have concurrent powers to make law with respect to goods & services.
  2. Article 269A[3]: In case of inter-state trade, the amount collected by the Centre is to be apportioned between the Centre and the States as per recommendations of the GST Council. Under GST, where centre collects the tax, it assigns state’s share to state, while where state collects tax, it assigns centre’s share to centre. Such proceeds shall not form a part of the Consolidated Fund of India to avoid having to pass an Appropriation Bill every time a deposition is made.
  3. Article 279A[4]: This Article provides for the constitution of a GST Council along with its powers and positions. The process of decision-making also has to be taken through voting.

The following Article has been repealed

Article 268A of the Constitution, as inserted by Section 2 of the Constitution (Eighty-eighth Amendment) Act, 2003 relating to Service tax levied by Union and collected and appropriated by the Union and the States.

The following Articles have been amended

  1. The residuary power of legislation of Parliament under Article 248 is now subject to Article 246A.
  2. Article 249 has been changed so that if 2/3rd majority resolution is passed by Rajya Sabha, the Parliament will have powers to make necessary laws with respect to GST also in national interest.
  3. Article 250 has been amended so that the Parliament will have powers to make laws related to GST during emergency period.
  4. Article 268 has been amended so that excise duty on medicinal and toilet preparation will be omitted from the state list and will be subsumed in GST.
  5. Article 269 would empower the Parliament to make GST related laws for inter-state trade / commerce.
  6. Article 270 now provides for collection and distribution of tax to be done according to Article 246A.
  7. Currently under Article 271, GST has been exempted from being part of the Consolidated Fund of India.
  8. Article 286 has been amended to include supply of goods and/or services under its ambit than just sale or purchase of goods.
  9. Article 366 now includes the definitions of Goods and Service Tax, Services and State.
  10. Article 279A has also been brought under the ambit of Article 368.[5]

The following schedules have been amended-

  1. The Sixth Schedule has been amended to give power to the District Councils to levy and collect taxes on entertainment and amusements. (para 8, sub-para3)
  2. The Seventh Schedule has been amended thus-
    1. In the Union List, petroleum crude, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel, tobacco and tobacco products have been removed from the ambit of GST and have been subjected to Union jurisdiction. Newspapers, advertisements, and Service Tax have been brought under GST. (entries 84, 92, 92C)
    2. In the State List, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption have been included, except where the sale is in course of inter-State or International trade and commerce. Entry tax and Advertisement taxes have been removed. Taxes on entertainment only to be included to the extent of that imposed by local bodies. (entries 52, 54, 55, 62)

Compensation and Transition

Upon recommendation by GST Council, the Parliament will provide compensation to the States in case of any loss due to implementation of GST upto five years. However no redressal against the advice or decisions of the GST council has been provided to the States. Special powers have been given to the president to make such necessary adaptations and modifications by order within a period of three years for removing any difficulty that may arise. For the transitional period, it has been provided that laws inconsistent with the above provisions shall continue to be in force until repealed by the legislature, or until a year has lapsed, whichever is earlier.

Impact on Federalism

This Act has in certain ways re-cast India’s federal structure in a manner that is fundamentally damaging to the basic structure of the Constitution of India by making the States’ fiscal policies subject to the control and veto of the Union Government in the GST Council. Also aggrieved States have not been provided with any effective remedy against the decisions of the GST Council. This can be seen by the fact that the dispute settlement mechanism will be constituted by the very GST Council against which a State may have a grievance. Hence, the 101st Amendment Act fundamentally upsets the federal structure of the Constitution, and therefore is an abrogation of the basic structure of the Constitution.

Federalism implies the distribution of power of the government between a central authority and the constituent units. While formulating the ‘Basic Structure Doctrine’ in Kesavananda Bharti v. State of Kerala[6], it was hinted at by the judges that the federal nature of the Indian Constitution was a basic feature which cannot be abrogated by a constitutional amendment.

This view was reinforced and positively asserted in S. R. Bommai v. Union of India[7], where all the judges in the majority acknowledged that the Indian constitution is a federal one, and that the federal structure of the Constitution is a basic feature of the Constitution. All of them further agreed that within the constitutional spheres allotted to them, States are sovereign and constrained only by the ‘express limitations imposed on them by the Constitution.’[8]

Moreover, the Supreme Court in State of W. B. v. Kesoram Industries Ltd.[9] upheld the powers of the State Governments in imposing taxes on mineral rights, even though the power to regulate and control such minerals was vested with the Union.

Federal Inconsistencies of the GST Council

The Act creates a framework for the formation of a GST Council under the newly inserted Article 279A, comprising of the Union Finance Minister as Chairperson, the Union Minister for State for Finance or Revenue, and all Finance Ministers from the respective State Governments. It has the power to issue recommendations on a range of matters outlined in Article 279A(4). Decisions of the GST Council are taken by super-majority of three fourths of the weighted votes of members present and voting, where the Union alone has one-third of the votes, while all the States together have two-thirds of the total votes.[10]

Herein, three major issues arise:[11]

Firstly, not all members of the Council have an equal vote in the Council. The votes are weighted with the Union Government’s vote having the weight of one-third of the total votes cast and all the States together having two-thirds of the total votes. With the requirement for majority being three-fourths of the votes cast, this effectively gives the Centre a veto over all recommendations of the Council as it is mathematically impossible to attain the required three-fourths majority if the Union does not vote for it. Since majority of the subjects over which the Council has jurisdiction fall under the ambit of taxation laws, it implies that the Union Government has veto power over the law making functions of the States – a concept contradictory to the federal structure of the Constitution.

Secondly, the Act leaves it to the GST Council itself to set up the manner of resolution of disputes and does not provide for any other separate. In effect, the Union, which dominates decision making in the GST Council, will also decide how these decisions may be challenged by aggrieved States. Given its veto, it can be safely assumed the Union may, at best, use this dispute settlement mechanism to enforce the decisions of the Council against States. A State that is unhappy with a GST Council recommendation is therefore left with little or no effective legal remedy.

Finally, the Supreme Court’s jurisdiction over decisions of the GST Council has been excluded by implication, specifically its jurisdiction under Article 131 in relation to inter-State or Union-State disputes. This makes it likely to be seen as an abrogation of judicial review under the Constitution – a basic feature that has been responsible for all constitutional amendments struck down so far including the controversial Constitution (99th Amendment) Act, 2015 in Supreme Court Advocates-on-Record Assn. v. Union of India[12]. (Kumar, 2016)


Hence to conclude, the 101st Amendment Act is, in certain ways, a direct attack on the federal structure of Indian polity. At present, while the disputes are mainly confined to specific provisions and tax slabs, it is being predicted that in future a lot of legal questions may arise regarding the voting procedure, dispute redressal mechanisms and the curbing of judicial review. As is apparent, this amendment clearly violates a number of federal notions and therefore a judicial review on this matter will not be uncalled for.


  1. Lourdunathan & P. Xavier, A study on implementation of goods and services tax (GST) in India: Prospectus and challenges, 3(1) INTERNATIONAL JOURNAL OF APPLIED RESEARCH 626, 626-627 (2016)
  2. Alok P. Kumar, For a Mess of Potage: The GST’s Promise of Increased Revenue to States Comes at the Cost of the Federal Structure of the Constitution, 28 NAT’L L. SCH. INDIA REV. 97, 97-113 (2016)
  3. THE CONSTITUTION OF INDIA, http://www.constitution.org/cons/india/p20368.html
  4. Ministry of Law and Justice (Legislative Deptt.), The Constitution (One Hundred and First Amendment) Act, 2016, II THE GAZETTE OF INDIA, Sep 8, 2016, at pp. 1-2.

[1] F. Lourdunathan & P. Xavier, A study on implementation of goods and services tax (GST) in India: Prospectus and challenges, 3(1) INTERNATIONAL JOURNAL OF APPLIED RESEARCH 626, 626-627 (2016)

[2] Ministry of Law and Justice (Legislative Deptt.), The Constitution (One Hundred and First Amendment) Act, 2016, II THE GAZETTE OF INDIA, Sep 8, 2016, at pp. 1-2.

[3] Supra 2, at pg. 2

[4] Supra 2, at pp. 3-4

[5] Supra 4

[6] (1973) 4 SCC 225

[7] (1994) 3 SCC 1

[8] Ibid.

[9] (2004) 10 SCC 201

[10] Supra 2, pp. 3-4

[11] See Alok P. Kumar, For a Mess of Potage: The GST’s Promise of Increased Revenue to States Comes at the Cost of the Federal Structure of the Constitution, 28 NAT’L L. SCH. INDIA REV. 97, 108-110 (2016) for detailed discussion on the issues.

[12] (2016) 5 SCC 1

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