Constitution and Taxes Flashcards
Which article gives power to levy tax
Article 265
Which article allocates power to impose taxes?
Article 246 read with List 1 and 2 provided in Schedule VII. There’s also concurrent power vested in both the governments as per list III.
Concurrent power v jurisdiction
Jurisdiction is where both can enforce laws on the same subject but state law must conform to union law and the doctrine of repugnancy. where there’s conflict, as per pith and substance and harmonious interpretation.
Concurrent power means that both union and state have power to take action but there is no hierarchy in terms of competence. Both will operate in their own domain without repugnancy.
When was concurrent power introduced
Article 246A introduced by the 101st constitutional amendment allows both union and state to levy GST, thereby unifying the indirect tax system.
Who imposes income tax?
The union holds authority to impose taxes on income, except for agricultural income.
Which article deals with residuary powers
Article 248 of the constitution, and Article 246 read with entry 97 list 1.
How is financial decentralisation brought about?
the allocation is made on administrative considerations and can lead to fiscal imbalance. therefore, the constitution provides for finance commission, makes recommendation for the allocation of the financial pool.
Landmark case for legislative relationship between Union and State in the area of capital value of agricultural assets.
Union of India v. HS Dhillon
Facts: HS Dhillon
UOI imposed a wealth tax through wealth tax act, 1957.
Imposed on the capital value of net wealth on the relevant valuation date.
Amended through Finance Act 1969 to include agricultural land for computation of net wealth.
Two arguments in HS Dhillon
- Wealth tax on agricultural land could be imposed only by state under Entry 49 of List II.
- Even if that was not the case, Parliament does not have competence to enact act imposing wealth tax on agricultural land under Entry 86 List I or its residuary powers.
Argument of petitioner Ground 1 HS Dhillon
- Did the legislation fall under Entry 49 or Entry 86 of the Union list?
Petitioner: List I Entry 86 excluded agricultural land, Entry 49 List II included taxes on land.
Court’s decision in HS Dhillon on ground of which list the power comes from
Court’s decision on 1
1. Argument about the exclusion in Entry 86 not valid because 86 refers to capital value of assets, while Entry 49 is tax on land. Wealth tax is not tax on the land but on the value or gain on that land that is part of your wealth.
2. Express exclusion in one list must correspond to express inclusion in another. The exclusion of agricultural land from Entry 86 List I has not been included in any other list.
3. This does not mean that this is a subject matter that cannot be legislated upon. In pith and substance therefore the impugned law came under Entry 97 of List 1 which is residuary entry.
Ground two in HS Dhillon
Assuming that the act fell under List 1 Entry 86 (centre), the words “exclusive of agricultural land” constituted a positive prohibition on parliament’s power to levy wealth tax on agricultural land.
Court’s opinion in Ground 2
The Constitution does not leave gaps where no legislature (Union or State) can legislate—this would be absurd.
Entry 97 (“any other matter”) grants additional powers, covering matters not in List II (State) or List III (Concurrent).
Test for Residuary Power:
If a matter is not in List II or III, Parliament can legislate—no need to check List I.
If respondents’ argument were accepted, Article 248 would need absurd rewording to exclude topics mentioned by exclusion in List I.
Justice Mitter’s Agreement:
Entry 97 must be read with Article 248(1), which clarifies that residuary powers cover only matters outside Lists II & III.
Constitutional Provisions relating to GST
Article 246A - Allows concurrent power to levy taxes on supply of goods and services without repugnancy.
Article 279A - established GST Council
What is the GST council
- Provides recommendations on all aspects of GST from legislation to implementation which union and state use to create laws, rules and regulations. Not binding but typically implemented.
GST council functions like?
A cabinet, while the parliament and state legislature function similarly to the president and governor respectively.
Composition of the Council
Union Finance Minister, State Finance Ministers, any other minister designated by the states.
Decision making of the GST council
Weightage system. At least 20 states must support a resolution to pass, if the union opposes it, it cannot be passed. Cooperative Federalism.
