101 Constitutional Amendment Act: First Amendment Act, 2016

By BYJU'S Exam Prep

Updated on: November 14th, 2023

The 101 Constitutional Amendment Act was instrumental in conducting in India’s Goods and Services Tax (GST). The Goods and Services Tax replaced all the erstwhile indirect taxes that were levied on the manufacture, sale, and consumption of goods and services across the country.

The 101 Constitutional Amendment Act is the first amendment made in the Constitution of India. Constitutional Amendment Act 101 allows both the centre and states to assess excise duty, Octroi tax, customs duty, service tax, entry tax, entertainment tax, etc., all substituted by the GST, making it a single indirect tax.

Download 101 Amendment of Indian Constitution Notes PDF

101 Amendment of Indian Constitution

Since GST involved a complete tax regime change and restructuring of central and state taxes; the responsibility to prepare a road map for implementing the GST under 101 Constitutional Amendment Act was handed down to the Empowered Committee of State Finance Ministers (EC).

  • The EC proposed to have two GST components, the central GST to be levied and collected by the center and the state GST to be levied and collected by the states.
  • The Parliament passed the 101 Constitutional Amendment Act in 2016, and after some ratifications put together by the states, the President of India gave assent to the bill.

Objectives of GST Under 101 Constitutional Amendment

Listed are the major objectives aspired to be accomplished by implementing GST under the 101 constitutional amendment act 2016.

  • The fundamental objective of GST was to build a common market with a constant tax rate in India.
  • The goods and services tax eradicates the initial taxes for the same transaction as input tax credits.
  • There is no export tax as GST boosts exports by refunding the amount collected on the inputs.
  • It seeks to increase revenue as it brings more taxpayers by growing the tax base.
  • The procedure of application and return of tax has been simplified with the use of common forms.
  • The tax payment and form submission became convenient with the introduction of online payment gateways.
  • A unified information technology system called Goods and Services Network (GSTN) got operated for simple GST operation.

Salient Features of 101 Constitutional Amendment Act

There are many features of the 101st constitution amendment act 2016. Keep reading to know everything in detail.

  • One hundred and first constitution amendment act led to Article 246A in the constitution, which gave it special powers to the parliament and the state legislatures to make GST tax laws, specifically on inter-state supplies.
  • Collection of revenue from Integrated goods and services tax (IGST) was also under Article 269A of constitutional amendment act 101. IGST deals with inter-state supplies. IGST is governed by the IGST Act 2017.
  • The insertion of Article 279A under the 101 constitutional amendment act gave the president power to form a GST council. The council could include ministers from state and union governments responsible for making suggestions or modifying any regulation related to GST.
  • Article 286 restricted the tax charge by the state on supplying products or services where such collection occurs outside the territory of the respective state or on the trade of goods in India.
  • If any state deals with a loss of revenue due to the undertaking of the GST, it can borrow compensation from the central government. It is applicable for up to five years and is controlled by the Goods and Services Act, 2017.

Constitution (One Hundred and First Amendment) Act, 2016 – India’s Tax System

The Constitution 101 Amendment Act 2016 ensued the amendment and insertion of certain articles of the Constitution to bring about comprehensive enactment of GST:

Creation of GST Council

Article 279A empowered the President of India to create GST Council with members from the Centre and the States. It is an apex forum authorized to create, modify, or remove any law based on GST in 101 Constitutional Amendment Act.

Special Provision for GST

Article 246A was inserted in the Constitution to validate the Parliament and the State legislatures to make laws on GST. However, the Parliament of India was awarded exclusive power to make laws for inter-state supplies. Additionally, crude petrol, natural gas, motor spirit, high-speed diesel, and aviation fuel were excluded from the scope of GST.

GST on Inter-State Supply

Article 269A covers how the revenue from inter-state supplies is shared between the center and the state and authorizes the GST Council to make laws regarding this. Importing goods or services is also considered inter-state supplies, and the central government imposes IGST on it.

Restrictions on Levying Tax on Services

Article 286 was already in place and restricted state governments from passing any law to levy tax on the sale or purchase of goods. After 101 Constitutional Amendment Act 2016, the restriction was extended to prevent the state governments from passing any laws on services.

Important Definitions and Revenue Compensation

Article 366, an existing article, was amended to include GST, Services, and State definitions. The GST 101 Constitutional Amendment Act also provides for relief to states due to the revenue loss emanating from the implementation of GST.

Changes in the 7th Schedule of the Constitution

Contain 3 lists that mention the subjects on which the union and the state governments can make laws. Appropriate changes were made to the list to facilitate smooth GST implementation.

  • The 101 Constitutional Amendment Act heralded a new chapter in India’s tax regime.
  • GST 101 Amendment minimized the tax burden on small companies and reduced corruption, instilling order and accountability in the unorganized sector.
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