Article 270 of the Costitution of India with Case law
Article 270 of the Constitution of India
Title: Taxes levied and distributed between the Union and the States
Text of Article 270 (as amended):
(1) All taxes and duties referred to in the Union List (except duties and taxes referred in Articles 268, 269, and 269A) shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided by Article 270.
(1A) Taxes collected under Article 246A(1) (i.e., Goods and Services Tax (GST)) shall also be distributed between the Union and the States as per the recommendations of the Finance Commission.
(2) The net proceeds of such taxes (except those excluded) shall not form part of the Consolidated Fund of India but shall be assigned to the States in the manner recommended by the Finance Commission and prescribed by the President.
(3) For the purposes of Article 270, "net proceeds" means the proceeds after deducting collection charges.
Key Concepts:
Distribution of Tax Revenue:
Central government levies and collects certain taxes but shares them with States.
The Finance Commission recommends the formula for this division.
GST and Article 270:
After the 101st Constitutional Amendment (2016), GST is also included under Article 270 via Article 270(1A).
Both Central GST and the Integrated GST are shared between the Union and States.
Exclusions:
Taxes in Article 268 (e.g., stamp duties), 269 (e.g., inter-State trade taxes before GST) and 269A (IGST) are not shared through Article 270.
Important Amendments:
80th Amendment (2000): Implemented the "Alternative Scheme of Devolution" — sharing of all central taxes except those mentioned in Articles 268 & 269.
101st Amendment (2016): Introduced GST; added Article 270(1A) to share GST revenue with States.
Important Case Laws on Article 270:
⚖ Union of India v. H.S. Dhillon
AIR 1972 SC 1061
The Court clarified that Parliament can levy taxes mentioned in the Union List even if those taxes are shared with States under Article 270.
Confirmed that Article 270 is about distribution, not about competence to levy taxes.
⚖ State of West Bengal v. Union of India
AIR 1963 SC 1241
Though not directly about Article 270, the case discussed the federal structure and fiscal autonomy of States.
The judgment supported the constitutional mechanism of revenue sharing through Finance Commission and Article 270.
⚖ Federation of Hotel & Restaurant Association of India v. Union of India (1989)
AIR 1989 SC 1637
Upheld the constitutional power of the Union to levy taxes, but noted that the distribution to States must follow Article 270.
Emphasized that tax collection and distribution are distinct constitutional functions.
⚖ Jindal Stainless Ltd. v. State of Haryana
(2016) 11 SCC 1
While mainly a case about entry tax, it referred to revenue distribution mechanisms under Article 270 and the evolving tax system (including GST).
Finance Commission’s Role:
Article 270 operates in conjunction with Article 280 (Finance Commission).
Finance Commission recommends the vertical (Union vs States) and horizontal (among States) devolution of net tax revenue.
Conclusion:
Article 270 is a cornerstone of fiscal federalism in India, ensuring that States receive a fair share of Union tax revenues. It reflects:
The constitutional commitment to revenue sharing,
The importance of the Finance Commission, and
An evolving structure that now includes GST revenue distribution.
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