Article 268 of the Indian Constitution is a crucial provision that outlines the distribution of certain tax revenues between the Union and the States. It addresses specific duties levied by the Union government but collected and utilized by the respective State governments. This mechanism ensures a degree of fiscal autonomy for the States while maintaining the Union’s authority to legislate on these matters.
Original Text
268. Duties levied by the Union but collected and appropriated by the States
(1) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected—
(a) in the case where such duties are leviable within any Union territory, by the Government of India; and
(b) in other cases, by the States within which such duties are respectively leviable.
(2) The proceeds in any financial year of any such duty leviable within any State shall not form part of the Consolidated Fund of India, but shall be assigned to that State.
Detailed Explanation
Article 268 deals with specific taxes where the power to legislate and levy the tax rests with the Union government, but the authority to collect and appropriate the proceeds is assigned to the State governments. This article essentially delineates a specific exception to the general rule of taxes collected forming part of the Consolidated Fund of India.
The key components of Article 268 are:
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Union List Duties: The article specifically mentions stamp duties and duties of excise on medicinal and toilet preparations as the types of duties to which it applies. These duties are enumerated in the Union List (List I) of the Seventh Schedule, granting the Union government the exclusive power to legislate on them.
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Levy by the Union: The power to legislate and impose these duties is vested solely in the Union government.
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Collection by the States: The responsibility for collecting these duties lies with the State governments within their respective territories. An exception exists for Union Territories, where the Union government retains the collection authority.
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Appropriation by the States: The revenue generated from these duties does not go into the Consolidated Fund of India. Instead, the entire amount is directly assigned to the State within which the duties were collected.
This provision intends to provide States with a dedicated source of revenue over which they have direct control and can use for their developmental needs without having to share with the union or other states.
Detailed Notes
- Scope: Applies specifically to stamp duties and excise duties on medicinal and toilet preparations as listed in the Union List.
- These are specifically mentioned in List I (Union List) of the Seventh Schedule of the Constitution.
- Levying Authority: The Government of India (Union Government) has the power to levy these duties.
- Collection Authority:
- States collect the duties within their respective territories.
- The Union government collects the duties in Union Territories.
- Appropriation: The revenues collected do not become part of the Consolidated Fund of India.
- Instead, the revenue is directly assigned to the State where the duty was collected.
- Purpose: Gives States greater fiscal autonomy.
- Provides a direct revenue source without being subject to Union distribution.
- Helps States meet their expenditure requirements.
- Distinction from Article 269: Article 269 deals with taxes levied and collected by the Union but assigned to the States. Article 268 deals with duties levied by the Union but collected and appropriated by the states
- Constitutional Amendment: Article 268 can only be amended through a constitutional amendment following the procedure outlined in Article 368.
Additional Comments
- The rationale behind Article 268 is to provide States with a degree of financial autonomy and a dedicated revenue stream to address their specific needs.
- This mechanism simplifies the revenue distribution process, as the collected funds are directly allocated to the State concerned without going through the complex formula-based distribution processes that apply to other taxes.
- The limited scope of Article 268, covering only stamp duties and excise duties on medicinal/toilet preparations, reflects a deliberate choice to balance Union control over specific revenue sources with State financial autonomy.
- This article promotes cooperative federalism by allowing states to benefit directly from duties levied by the Union within their boundaries.
- While the article provides a degree of financial autonomy, it’s important to note that the Union still retains the power to legislate and set the rates for these duties, thus maintaining overall control over this revenue stream.
Summary
Article 268 empowers States by allowing them to collect and keep revenues from specific Union-levied duties, namely stamp duties and excise duties on medicinal and toilet preparations. The Union legislates and levies these duties, but the States collect them within their borders, and the revenue directly benefits the State’s finances instead of going to the Consolidated Fund of India. This provision strengthens State fiscal autonomy and promotes a more balanced distribution of financial resources.