Part XII: Finance, Property, Contracts and Suits

Article 271: Surcharge on Certain Duties and Taxes for Purposes of the Union

Original Article:

Notwithstanding anything in Articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred to in those articles [except the goods and services tax under Article 246A] by a surcharge for purposes of the Union, and the whole proceeds of any such surcharge shall form part of the Consolidated Fund of India.

Explanations:

Article 271 empowers Parliament to levy surcharges on specified duties and taxes beyond the rates provided under Articles 269 and 270, for Union purposes. The revenue collected from these surcharges is exclusively for the Union and forms part of the Consolidated Fund of India.

Clause-by-Clause Explanation:

Union's Power to Levy Surcharges

Article 271 grants Parliament the authority to impose additional charges on certain taxes for Union purposes, ensuring the Union can meet national priorities.

Real-Life Example: Surcharges on income tax applied to higher income brackets are used to fund national programs like healthcare or education.

Exclusion of GST

The Constitution (101st Amendment) Act, 2016, excluded GST from the scope of Article 271, ensuring its collaborative management by both Union and States.

Real-Life Example: GST collected on inter-State transactions is shared between the Union and States under Article 269A, and not subject to surcharges under Article 271.

Historical Significance:

The provision for surcharges under Article 271 has been used during financial crises, natural disasters, or to meet specific national demands. It reflects the Union's flexibility in generating revenue without altering the basic tax structure.

Real-Life Examples:

1. Post the COVID-19 pandemic, surcharges on higher income tax brackets were used to fund national healthcare programs.

2. Environmental surcharge levied on coal to promote renewable energy projects is another example of Union priorities funded through Article 271.

Legislative History:

Originally introduced as Article 252 in the Draft Constitution, Article 271 was debated extensively in the Constituent Assembly and incorporated into the final Constitution to provide financial flexibility for the Union.

Debates and Deliberations:

Dr. B.R. Ambedkar emphasized the importance of a surcharge provision for addressing unforeseen financial needs without disrupting the broader fiscal framework. Shri T.T. Krishnamachari supported this flexibility, noting its utility during national emergencies.

Members like Pandit H.N. Kunzru debated the implications of central surcharges on State autonomy but agreed that such provisions were necessary for a strong federal system.

Additionally, Shri Alladi Krishnaswami Ayyar highlighted how surcharges could be vital for defense expenditures and disaster relief, ensuring the Union had the necessary resources for critical situations.