Article 269A: IGST Levy and Apportionment

CONSTITUTION OF INDIAArticle 269A

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(1) Goods and Services Tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. (2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India. (4) Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods or services or both takes place in the course of inter-State trade or commerce. (5) Parliament may, by law, provide for the manner in which, and the conditions for which, the tax levied under clause (1) is apportioned between the Union and the States.

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💰 Article 269A: GST

The constitutional home of the Goods and Services Tax.

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Art. 269ALevy and collection of GST

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IGSTInter-State supplies taxed as IGST

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GST CouncilArt 279A sets up the GST Council

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ConcurrentBoth Union and States levy GST

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101st AmdtInserted by the 101st Amendment, 2016

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ExamGST needed a constitutional amendment

💡The trap: Article 269A (added by the 101st Amendment) provides for GST; Article 279A creates the GST Council.

mcqquestion.comUPSC · CDS · NDA · CAPF · SSC

Article 269A levies and collects IGST at the Centre and apportions it to the States — clause (2) keeps a State’s apportioned share OUT of the Consolidated Fund of India.

In 2019, auditors found ₹13,944 crore in inter-State GST sitting exactly where the Constitution says it should never sit: the Union’s own Consolidated Fund. Article 269A explains why that was a problem – and why the money owed to the States must never pass through the Centre’s purse.

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Indian Polity · Polity0264

Article 269A

IGST Levy and Apportionment

8 Sep 2016

The 101st Amendment Act receives assent, inserting Article 269A.

1 Jul 2017

The IGST Act, 2017, commences, putting Article 269A into practice.

2019

CAG Report No. 11 flags ₹13,944 crore in unapportioned IGST.

22 Sep 2025

The GST Compensation Cess is phased out for most goods.

Never the Consolidated Fund

Article 269A(2) bars a State’s apportioned IGST share from ever entering the Consolidated Fund of India — a line auditors found breached by ₹13,944 crore in 2018-19 alone.

📑 Contents

1One Tax, Two Governments: The IGST Design
2Clause (2): The Consolidated Fund Bar
3Clauses (4)-(5): Place of Supply and the Formula
4How IGST Settles in Practice
5Clause (3): When IGST Pays a State’s GST
6The 101st Amendment Story (2016)
7Article 246A: The Other Half of the Bargain
8GST Council: The Recommendation Engine
9CAG Report No. 11 of 2019: The ₹13,944 Crore Gap
10The Compensation Cess Lifecycle (2017-2025)
11Who Levies IGST? (C3167-style)
12The Consolidated Fund Distractors
13GST 2.0 and the Cess (C3171-style)
14GST 2.0: The Cess Leaves, the 40% Slab Arrives
15The ₹13,944 Crore Lesson for Centre-State Trust

🏛️ Must Know

One Tax, Two Governments: The IGST Design

Why the Centre?Inter-State trade touches at least two States at once, so no single State can fairly tax it. Only the Union can levy a tax that spans State borders – which is why clause (1) hands IGST to the Government of India.
Levy + collect does not mean keepClause (1) says IGST “shall be levied and collected by the Government of India” – but the Union keeps only its own share. The rest is “apportioned between the Union and the States.”
Parliament + GST CouncilThe apportionment formula comes from “Parliament by law on the recommendations of the Goods and Services Tax Council” – a statute needs both Parliament’s legislation and the Council’s political consensus.
Imports count as inter-StateSupplies “in the course of inter-State trade or commerce” include imports – that is the constitutional hook for charging IGST on goods entering India from abroad.

Clause (2): The Consolidated Fund Bar

The absolute barClause (2) declares that the amount apportioned to a State “shall not form part of the Consolidated Fund of India” – the words are mandatory, not discretionary.
Why the bar existsIf a State’s share first entered the Consolidated Fund, it would need Parliamentary appropriation to come out again. The bar ensures the Union cannot hold State GST money hostage to its own Budget process.
The 2019 breachThe CAG’s Report No. 11 of 2019 found ₹13,944 crore of 2018-19 IGST left unapportioned – parked, in effect, in the Consolidated Fund. That is exactly what clause (2) forbids.
No stated reasonThe Department of Revenue gave no reason for the delay, which turned a settlement lag into a running Centre-State grievance at GST Council meetings.

Clauses (4)-(5): Place of Supply and the Formula

Place of supply decides the levyClause (4) lets Parliament lay down “the principles for determining the place of supply” – that test decides whether a supply is inter-State (IGST) or intra-State (CGST + SGST).
The IGST Act, 2017The Integrated Goods and Services Tax Act, 2017, is the law made under these clauses; its place-of-supply rules turn the constitutional principles into workable tests.
Clause (5) = the apportionment lawClause (5) lets Parliament specify “the manner in which, and the conditions for which” IGST is apportioned – the procedural skeleton for settling the money between the Union and the States.
Why this is exam goldClauses (4)-(5) are the constitutional answer to “who decides what is inter-State supply?” – always Parliament by law, never a State legislature or the executive acting alone.

🏡️ Good to Know

How IGST Settles in Practice

The IT system does the heavy liftingMost IGST settles automatically: the GST Network matches input-tax-credit claims, so the State where the buyer sits receives its share of the tax collected by the seller’s State.
Why a residual always remainsCredit claims rarely balance perfectly across States, so an unmatched residual is left over each year – the machines cannot mechanically assign it.
The 50:50 provisional fixThat residual is shared provisionally, on an ad-hoc 50:50 basis between the Centre and the States, until a fuller settlement is worked out.
Where it breaks downWhen apportionment lags, the money sits parked in the Consolidated Fund – the exact violation clause (2) was written to prevent.

Clause (3): When IGST Pays a State’s GST

The cross-adjustment ruleClause (3) covers the case where IGST collected is “used for payment of the tax levied by a State under article 246A” – that amount too “shall not form part of the Consolidated Fund of India.”
Why 246A is in the pictureArticle 246A lets both the Union and the States legislate on GST; clause (3) stops the Union from routing State GST money through its own Fund just because IGST was the collection vehicle.
Same tax base, one collection pointRead clauses (2) and (3) together: IGST is a pass-through – collected by the Centre, but owned, in defined shares, by whoever the law assigns it to.
How exams test itA question asking “which amount does NOT form part of the Consolidated Fund?” needs both clauses – the bar covers apportioned shares AND cross-adjusted payments.

✅ Test Yourself

Work through a 5-question chain on Article 269A, then keep practising with a random Indian Polity question.

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⚡ Great to Know

The 101st Amendment Story (2016)

The constitutional momentThe Constitution (101st Amendment) Act, 2016, received assent on 8 September 2016, inserting Articles 246A, 269A and 279A to make GST possible.
Before GST: the cascading messBefore 2017, inter-State sales paid Central Sales Tax plus a tangle of State levies; taxes piled on taxes and States competed on rates, fragmenting the national market.
Why Article 269A specificallyA single national market needed a single inter-State levy; Article 269A is the constitutional slot for that levy, distinct from the States’ intra-State power under Article 246A.
The takeawayGST was a federal fiscal bargain: the Centre collects the inter-State tax, but the Constitution itself forces it to share – the design is anti-centralising by its text.
Result in one lineArticle 269A turned a political agreement into a binding rule: inter-State GST belongs, in defined shares, to both levels of government.

Article 246A: The Other Half of the Bargain

A shared legislative fieldArticle 246A(1) gives Parliament and State legislatures concurrent power to make GST laws – a break from the strict Union/State lists that govern most other taxes.
Why concurrent, not exclusiveGST is one tax on one base, so splitting the power would create gaps; a concurrent field lets both levels legislate, with intra-State supply split as CGST + SGST.
How clause (3) ties the two articlesArticle 269A(3) is the bridge: when IGST collected is used to pay a State’s 246A tax, that money stays outside the Consolidated Fund – the State keeps its revenue.
The exam pairingPrelims pairs 246A and 269A in one question: “who can legislate on GST?” (both levels) versus “who levies inter-State GST?” (Government of India).
Why the pair mattersTogether they form GST’s constitutional core: a concurrent law-making power, a Union levy on inter-State supply, and a mandatory sharing rule.

GST Council: The Recommendation Engine

Who sits on itArticle 279A creates the GST Council: the Union Finance Minister (Chairperson), the Union Minister of State for Finance, and one Minister from each State.
Why its recommendations matter hereArticle 269A(1) makes the apportionment law hinge on the Council’s recommendations – the Constitution builds the federal bargain into the machinery, not just the text.
The Mohit Minerals (2022) nuanceIn Union of India v. Mohit Minerals (2022), the Supreme Court held the Council’s recommendations are recommendatory, not binding on the Union or the States.
How apportionment still needs bothThe apportionment law remains a “law of Parliament”; the Council’s job is to forge consensus before Parliament legislates, so the States are heard on the formula.
Result to rememberThe Council recommends, Parliament enacts, the Government of India collects – get that sequence right and the 269A MCQs answer themselves.

CAG Report No. 11 of 2019: The ₹13,944 Crore Gap

What the CAG foundFor 2018-19, IGST of ₹13,944 crore remained unapportioned; the CAG flagged that it sat in the Consolidated Fund of India instead of being settled to the States.
Why this is constitutional, not just accountingA State’s apportioned share can never lawfully sit in the Consolidated Fund; the delay converted a settlement problem into a clause (2) violation.
The recurring patternThe Department of Revenue gave no stated reason, and the issue resurfaced at GST Council meetings as States pressed for their money.
Takeaway for answersQuote “shall not form part of the Consolidated Fund of India” – it is the crispest line in any 269A mains answer or MCQ.
How it links to the panelThe CAG case is the concrete proof that clause (2) is not a formality – it is a fiscal entitlement the Centre must honour on time.

The Compensation Cess Lifecycle (2017-2025)

The 14% guaranteeFrom GST’s launch, a separate Compensation Cess promised States 14% annual revenue growth for five years, funded from cess on demerit and luxury goods.
How it connected to 269AThe cess was collected through the IGST machinery on inter-State supplies, so it rode the same apportionment pipeline Article 269A governs.
22 September 2025Under the 56th GST Council’s “GST 2.0” reform, the cess was phased out for almost all goods and folded into a new 40% top tax rate.
Why tobacco survivesCigarettes, bidis, pan masala and chewing tobacco still pay 28% GST plus the variable cess, until the Centre repays pandemic-era compensation loans.
Result: the endgameOnce those loans clear, even tobacco is expected to move into the 40% slab – closing the Compensation Cess chapter entirely.

🎯 PYQ / Exam Angle

CDS II 2017: Why GST Needed an Amendment

QuestionCDS and other competitive exams ask why a constitutional amendment was needed to introduce GST — because both the Union and the States had to surrender taxation powers.
WhyGST is a concurrent tax collected by both levels, so it required amending the Constitution (101st Amendment).
LinkSource: CDS II 2017 (see Q112).

Who Levies IGST? (C3167-style)

Fact testedArticle 269A(1) gives the levy and collection of inter-State GST to the Government of India – never to a State government or the GST Council.
Distractor“The GST Council levies IGST” is a classic wrong option: the Council recommends, Parliament legislates, the Government of India levies – three different actors.
EliminateAny option naming an individual State’s government as the IGST collector fails because inter-State trade crosses borders no single State can police alone.
TryRewrite the sentence: “IGST is levied and collected by ____ and apportioned between ____ and ____” – Centre, Union, States – and the answer writes itself.

The Consolidated Fund Distractors

Fact testedClause (2) bars a State’s apportioned IGST share from the Consolidated Fund; clause (3) extends the bar to IGST used to pay a State’s 246A tax.
TrapA statement that apportioned IGST “goes into the Consolidated Fund and is then distributed to States” looks plausible – and is exactly backwards.
DistractorThe GST Compensation Fund (under the 2017 Compensation Act) is a real Fund, but it is not the Consolidated Fund of India – do not let one “Fund” mask the other.
EliminateIf a statement mentions Parliamentary appropriation or a vote for State GST shares, eliminate it – the whole point of clause (2) is that no appropriation is needed.

GST 2.0 and the Cess (C3171-style)

Fact testedThe 56th GST Council meeting (22 September 2025) phased out the Compensation Cess for most goods under “GST 2.0.”
Trap“The Compensation Cess was abolished completely” overstates it: tobacco products still pay 28% GST plus the variable cess.
DistractorThe new 40% top rate is a GST rate, not a cess – mixing the two is a favourite wrong option.
TryLink the pair: “which body recommended the phase-out?” – the GST Council; “until when does tobacco’s cess continue?” – until compensation loans are repaid.

📰 Current Affairs / So What

GST 2.0: The Cess Leaves, the 40% Slab Arrives

DevelopmentThe 56th GST Council meeting of 22 September 2025 approved “GST 2.0”: the Compensation Cess ends for almost all goods and a 40% top rate absorbs it.
Why it mattersThe cess was the safety net that made States accept GST in 2017; its exit ends the 14% growth guarantee and makes Article 269A’s ordinary apportionment the main channel for State GST revenue.
So whatFor mains, GST 2.0 tests federal fiscal relations – whether the Union can phase out compensation without a fresh bargain, and whether clause (2)’s no-Consolidated-Fund discipline holds as settlement volumes grow.

The ₹13,944 Crore Lesson for Centre-State Trust

DevelopmentThe CAG’s 2019 finding that ₹13,944 crore of IGST sat unapportioned remains the standard example of clause (2) being breached.
Why it mattersIt shows the Constitution’s anti-centralising text still depends on honest administration – a Fund bar only works if settlement actually happens on time.
So whatIn a mains answer on cooperative federalism, cite it as the concrete case where a State’s constitutional entitlement was delayed by the Union’s own machinery.