101st Constitutional Amendment 2016 GST | Kerala PSC Graduate

The 101st Constitutional Amendment Act, 2016 introduced the Goods and Services Tax (GST) in India, marking a transformative shift in the country’s indirect tax regime. This amendment inserted new Articles into the Constitution to enable a dual GST model, harmonising central and state taxation powers. Given its significance in redefining federal fiscal relations, the topic is frequently tested in Kerala PSC exams, especially in mains papers covering Indian Polity and Economic Reforms, with questions often drawn from constitutional provisions, implementation timelines, and institutional mechanisms.

Key Facts and Chronology

• The 101st Constitutional Amendment Act received presidential assent on 8 September 2016.
• The amendment came into force in two phases: certain provisions were notified on 12 September 2016, and the GST regime was fully implemented on 1 July 2017.
• The Constitution (One Hundred and First Amendment) Act, 2016, was introduced as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 in the Lok Sabha on 19 December 2014.
• The Bill was passed by the Lok Sabha on 6 May 2015 and by the Rajya Sabha on 3 August 2016.
• It required ratification by at least half of the state legislatures, which was completed by 16 states, including Kerala, Tamil Nadu, and Gujarat.
• The GST was launched at midnight in a special session of Parliament on 1 July 2017, with President Pranab Mukherjee and Prime Minister Narendra Modi presiding.

Constitutional Provisions Inserted

Article Number	Subject	Description
Article 246A	Special provision for GST	Grants Parliament and state legislatures concurrent power to make laws on goods and services tax, overriding the earlier division under Article 246.
Article 269A	Levy and collection of GST on inter-state trade	Empowers Parliament to formulate principles for determining the place of supply, apportionment of tax between the Union and states, and the role of the GST Council.
Article 279A	Formation of the GST Council	Mandates the creation of the GST Council under the chairmanship of the Union Finance Minister, with representation from all states.
Article 366(12A)	Definition of Goods and Services Tax	Defines GST as any tax on supply of goods or services or both, except alcoholic liquor for human consumption.
Article 366(29A)	Expanded definition of ‘tax on sale’	Includes lease, rental, and supply of goods under works contracts, facilitating GST integration.

Structure of the GST Council

Position	Composition	Role and Appointment
Chairperson	Union Finance Minister	Currently Nirmala Sitharaman (as of 2023), chairs all meetings of the GST Council.
Members	One Union Minister of State (Finance) and one Minister from each state government	State representatives are typically their Finance Ministers; decisions are made by a three-fourth majority.
Voting Weight	Centre: 1/3; States: 2/3 collectively	The Union Government has one-third of the total votes, while all states together have two-thirds, with each state having one vote.
Quorum	One-half of total members	At least half the members must be present for a valid meeting.
Decisions	By three-fourths majority of votes cast	Both Centre and states must agree on key rates and policies, ensuring federal consensus.

Key Features of the Dual GST Model

• India adopted a dual GST model due to its federal structure, where both the Union and state governments have the power to levy and collect taxes.
• Central GST (CGST) is levied under the CGST Act 2017 and collected by the Central Government on intra-state supplies.
• State GST (SGST) is levied under the respective SGST Act of each state, including the Kerala Goods and Services Tax Act 2017, and collected by the state government.
• Integrated GST (IGST) is levied under the IGST Act 2017 on inter-state supplies and imports, with revenue shared between the Centre and the destination state.
• Union Territory GST (UTGST) is applicable in Union Territories without legislatures, such as Chandigarh, under the UTGST Act 2017.
• The tax is destination-based, meaning the state where goods or services are consumed receives the SGST/UTGST portion.

Constitutional and Legal Context

• The power to levy taxes on goods and services was previously divided: the Centre could tax manufacture (under Entry 84, List I), while states could tax sale (under Entry 54, List II) of goods.
• The 101st Amendment overrode this division by inserting Article 246A, enabling both levels of government to tax the same transaction under CGST and SGST.
• The amendment modified the Seventh Schedule of the Constitution by inserting Entries 26, 27, and 28 in List III (Concurrent List) for GST on goods, services, and principles for determining place of supply.
• The GST Council, established under Article 279A, is tasked with making recommendations on tax rates, exemptions, thresholds, and dispute resolution mechanisms.
• The Council’s recommendations are not binding, but the Union and state governments generally adhere to them to maintain fiscal harmony.

Exemptions and Special Provisions

• Alcoholic liquor for human consumption is explicitly exempted from GST under Article 366(12A), and continues to be taxed under state excise laws.
• Petroleum products such as crude oil, diesel, petrol, aviation turbine fuel, and natural gas were initially kept outside GST, though they may be included in the future by GST Council decision.
• Electricity is not subject to GST and remains under the Electricity Act 2003 and state-level taxation.
• The Constitution empowers the GST Council to decide on the inclusion of these items based on consensus.
• The Union Government compensates states for any revenue loss due to GST implementation under Section 7 of the GST (Compensation to States) Act, 2017, for a period of five years from 2017 to 2022.

Judicial and Institutional Oversight

• The Supreme Court, in M/S S.S. Associates v. Union of India, 2021, upheld the constitutional validity of the GST Council’s recommendations and its role in dispute resolution.
• In Union of India v. Delhi Airtech Services Pvt. Ltd., 2022, the Court clarified that the IGST Act applies uniformly across inter-state supplies, reinforcing the integrated nature of GST.
• The GST Network (GSTN), a non-profit company established in 2013 with 51% government stake, manages the IT infrastructure for GST registration, returns, and payments.
• The Central Board of Indirect Taxes and Customs (CBIC) administers CGST and IGST, while state commercial tax departments handle SGST.
• The GST Practitioners Scheme, governed under Section 48 of the CGST Act 2017, allows registered professionals to assist taxpayers in compliance.

Quick Recap for PSC

• The 101st Constitutional Amendment Act received presidential assent on 8 September 2016.
• Article 246A grants concurrent power to Parliament and state legislatures to legislate on GST.
• The GST Council is established under Article 279A of the Constitution.
• GST was implemented nationwide on 1 July 2017.
• Alcoholic liquor for human consumption is exempt from GST under Article 366(12A).
• The GST Council requires a three-fourth majority of votes cast for decisions, with the Centre holding one-third and states two-thirds of voting weight.
• Petroleum products were initially excluded from GST but may be included by a decision of the GST Council.
• The GST (Compensation to States) Act, 2017, provided revenue loss compensation to states until 2022.