Part XII: Finance, Property, Contracts and Suits

Article 268A: Service tax levied by Union and collected and appropriated by the Union and the States

Original Article:

268A. Service tax levied by Union and collected and appropriated by the Union and the States has been omitted by the Constitution (One Hundred and First Amendment) Act, 2016, s. 7 (w.e.f. 16-9-2016).

Note: Originally inserted by the Constitution (Eighty-eighth Amendment) Act, 2003, s. 2, it was intended to govern the collection and appropriation of service tax between the Union and the States.

Explanations:

Article 268A, initially added by the Constitution (Eighty-eighth Amendment) Act, 2003, aimed to provide a framework for the levy and collection of service tax in India. This article was omitted in 2016 with the implementation of the Goods and Services Tax (GST), which subsumed service tax within its broader structure.

Clause-by-Clause Explanation:

Purpose:

Article 268A aimed to formalize revenue sharing from service tax between the Union and the States, reflecting the growing importance of the service sector in India’s economy.

Transition to GST:

The One Hundred and First Amendment replaced Article 268A, integrating service tax within GST, which provides a uniform tax regime for goods and services across India.

Historical Significance:

Article 268A signified India's recognition of the service sector's contribution to national revenue. However, its omission during the GST rollout highlights the country’s move toward a more streamlined tax system.

Real-Life Examples:

Before GST, service tax was a major source of revenue for both Union and State governments. For instance, sectors like telecommunications and banking were significant contributors to service tax collections.

Under GST, these revenues are now consolidated, simplifying compliance for businesses operating across multiple states.

Debates and Deliberations:

During the introduction of Article 268A, legislators debated the balance of power between the Union and the States in collecting and utilizing service tax. Concerns about the administrative complexity of revenue sharing were addressed by ensuring clear guidelines for appropriation.