Article 269A: IGST Levy and Apportionment

A trader in Gujarat sells goods to a buyer in Kerala. The sale crosses a State line. So which government should tax it? Gujarat? Kerala? Neither can do it fairly. Article 269A gives the answer: the Centre taxes it, but the Constitution forces the Centre to hand the States their share, and never to park it in its own fund.

1Chapter 1: One Tax, Two Governments

Must Know

Clause (1): the Centre levies, the States share

• Article 269A(1) says GST on inter-State supply is levied and collected by the Government of India.
• The tax is then apportioned between the Union and the States.
• A sale across State lines touches at least two States. No single State can fairly tax it.
• Only the Union can levy a tax that spans State borders.
• “Levy and collect” does not mean “keep”. The Centre keeps only the Union’s share.
• Imports count as inter-State supply, through an Explanation. That is the hook for IGST on goods entering India.

Who decides the sharing?

• Parliament sets the manner by law.
• It does so on the recommendations of the GST Council.
• So a sharing law needs both Parliament’s legislation and the Council’s political consensus.
• Remember the chain: the Council recommends. Parliament legislates. The Government of India levies and collects.

2Chapter 2: The Fund Bar and the ₹13,944 Crore Gap

Must Know

Clause (2): a rule with no exceptions

• Clause (2) says the amount apportioned to a State shall not form part of the Consolidated Fund of India.
• The words are mandatory, not optional.
• Money in that Fund needs Parliament’s appropriation before it can be spent.
• If a State’s share went in first, the Centre could hold it hostage to its own Budget process.
• The bar stops that.

Clause (3): the cross-payment case

• Clause (3) covers IGST used to pay a State’s tax under Article 246A.
• That amount also stays outside the Consolidated Fund.
• Clause (4) mirrors it: State GST used to pay IGST stays outside the State’s own fund.
• Read the earlier story in Article 246A: Special Provision for GST Law-Making Power.

When the rule was broken

• The CAG’s Report No. 4 of 2020 covered the Union accounts for 2018-19.
• It found ₹13,944 crore of IGST left un-apportioned, in effect sitting in the Consolidated Fund.
• That is exactly what clause (2) forbids.
• The CAG also noted ₹15,001 crore wrongly booked as the States’ share of IGST.
• The Department of Revenue gave no reason for the delay.
• A settlement lag became a running Centre-State grievance at GST Council meetings.

3Chapter 3: How the Money Actually Moves

Good to Know

Computers do the heavy lifting

• Most IGST settles automatically.
• The GST Network matches input-tax-credit claims.
• The State where the buyer sits receives its share of the tax the seller’s State collected.
• Claims rarely balance perfectly, so a residual is left each year.
• Machines cannot assign it.
• That residual is shared provisionally on an ad-hoc 50:50 basis between the Centre and the States.
• When settlement lags, the money sits in the Consolidated Fund, which is the very breach clause (2) was written to prevent.

Place of supply and the IGST Act

• Clause (5) lets Parliament lay down the principles for place of supply.
• It also decides when a supply counts as inter-State.
• Place of supply decides the tax: inter-State means IGST, intra-State means CGST plus SGST.
• The law made on this basis is the Integrated GST Act, 2017.
• The answer to “who decides what is inter-State?” is always Parliament by law.

4Chapter 4: A Bargain Written Into the Constitution

Good to Know

Before GST: a messy pile

• Before 2017, inter-State sales paid Central Sales Tax plus a tangle of State levies.
• Taxes piled on taxes. States competed on rates. The national market was fragmented.

The 101st Amendment

• The Constitution (101st Amendment) Act, 2016 received assent on 8 September 2016.
• It inserted Articles 246A, 269A and 279A.
• 246A decides who makes GST laws. 269A decides who levies inter-State GST. 279A creates the GST Council.
• GST was a federal bargain: the Centre collects, but the Constitution itself forces it to share.

The Council and Mohit Minerals

• The Council has the Union Finance Minister as Chairperson, the Union Minister of State for Finance and one Minister from each State.
• In Union of India v. Mohit Minerals (2022), the Supreme Court held its recommendations are not binding on the Union or the States.
• Article 265 adds that no tax may be collected without authority of law.
• The Council forges agreement. Parliament still has to pass the law.
• See GST Council and Rate Rationalisation.

5Chapter 5: The Cess That Came and Went

Great to Know

The compensation promise

• From GST’s launch, a Compensation Cess promised States 14% yearly revenue growth for five years.
• It was charged on luxury and “demerit” goods.
• It rode the same IGST machinery on inter-State supplies.
• It was a safety net that helped States accept GST in 2017.
• It was later extended to repay money borrowed during the pandemic.

The endgame

• Under “GST 2.0”, from 22 September 2025, the cess was phased out for almost all goods.
• A new 40% top rate was added.
• The cess on tobacco and pan masala ended on 1 February 2026.
• It was replaced by an additional central excise duty on tobacco and a Health and National Security Cess on pan masala.
• Source: All India Radio News.
• Do not mix up the Compensation Fund with the Consolidated Fund. They are different.
• The 40% rate is a GST rate. It is not a cess.

Articles that work with 269A

• See Article 301: Freedom of Trade, Commerce and Intercourse and Article 286: Restrictions on State Taxation of Interstate Trade.

6In the News: GST 2.0 and the IGST Audit

Current Affairs

GST 2.0

• The 56th GST Council meeting approved “GST 2.0”.
• It cut the old slabs to two main ones and added a 40% top rate.
• Most new rates started on 22 September 2025.
• The cess exit ends the 14% growth guarantee.
• Ordinary IGST apportionment is now the main channel for State GST revenue.
• Source: PIB.

CAG Audit Report No. 25 of 2025

• It looked at year-end IGST balances from 2018-19 to 2022-23.
• It said they should be apportioned to the Centre and the States under section 17(2A) of the IGST Act.
• The ₹13,944 crore finding remains the standard example of clause (2) being breached.
• It shows the Constitution’s anti-centralising text still depends on honest administration.

7Previous Year Questions

Exam angle: one real question, and the traps around it.

Quick Q&A

• Who levies IGST? Government of India.
• Clause (2) bars? State share in Consolidated Fund.
• CAG 2018-19 gap? ₹13,944 crore.
• Residual shared? 50:50, provisionally.
• Cess promise? 14% yearly growth.