Taxes Levied and Collected by Union but Assigned to States

Taxes assigned to states under Article 269 of the Constitution are a category of Union taxation where the Government of India does the levying and the collecting, but the money itself never becomes Union revenue — it is assigned, in full, to the states in which the underlying transaction took place. This makes Article 269 one of the clearest illustrations of how Indian fiscal federalism separates the administrative convenience of a single collecting authority from the constitutional entitlement to the revenue.

What Article 269 Covers

Article 269(1) applies to two kinds of taxes: taxes on the sale or purchase of goods, and taxes on the consignment of goods, in each case where the transaction takes place in the course of inter-State trade or commerce. The Explanation to the clause clarifies both terms — "taxes on the sale or purchase of goods" excludes newspapers, and "taxes on the consignment of goods" covers a consignment whether it is made to the person sending it or to any other person, so long as it occurs in the course of inter-State trade or commerce. Since the Constitution (One Hundred and First Amendment) Act, 2016, this category operates "except as provided in article 269A" — meaning goods and services tax on inter-State supplies has been carved out into its own separate mechanism, leaving Article 269 to apply to non-GST inter-State taxation such as the historical Central Sales Tax framework.

Levied and Collected by the Union, Assigned to the States

The defining feature of Article 269 is the split between who levies/collects and who benefits. The Government of India levies and collects these taxes, but Article 269(1) provides that they "shall be assigned and shall be deemed to have been assigned to the States on or after the 1st day of April, 1996" in the manner set out in clause (2). This 1996 cut-off reflects the Constitution (Eightieth Amendment) Act, 2000, which substituted the present clauses (1) and (2) with effect from that date, reworking how the distribution of these particular proceeds was to operate.

How the Net Proceeds Are Distributed

Article 269(2) states that the net proceeds of these taxes in any financial year — except the portion attributable to Union territories — shall not form part of the Consolidated Fund of India. Instead, they are assigned to the states within which the tax is leviable in that year, and distributed among those states according to principles of distribution that Parliament formulates by law. Article 269(3) further empowers Parliament to lay down the principles for determining when a sale, purchase, or consignment of goods is treated as taking place in the course of inter-State trade or commerce — a definitional question that matters enormously for allocating tax revenue to the correct state.

Where Article 269 Fits Among Centre-State Tax Categories

The Constitution's chapter on Centre-State financial relations sorts Union-collected taxation into several distinct arrangements, and Article 269 is best understood next to its neighbours:

Article	Levied by	Collected by	Proceeds go to
268	Union	States	State where collected (never enters Consolidated Fund of India)
269	Union	Union	States, per principles Parliament formulates by law
269A	Union	Union	Apportioned between Union and states on GST Council's recommendation
270	Union	Union	Shared between Union and states per Finance Commission-informed formula
271	Union (as a surcharge under 269/270)	Union	Wholly to the Consolidated Fund of India

This table shows why Article 269 sits in the middle of the spectrum: unlike Article 268's stamp duties, where states themselves collect, and unlike Article 270's shared-pool taxes, Article 269 gives the Union sole collecting machinery while denying it any share of the proceeds at all.

UPSC Relevance

Prelims

• Article 269 taxes are levied and collected by the Union but assigned entirely to states — none of the net proceeds form part of the Consolidated Fund of India (except the Union territory share).
• The 1996 effective date for assignment traces to the Constitution (Eightieth Amendment) Act, 2000.
• The "except as provided in article 269A" qualifier was inserted by the 101st Amendment Act, 2016, to make room for GST.

Mains

• Examine how Article 269 illustrates the distinction between the administrative locus of tax collection and the constitutional entitlement to tax revenue in Indian fiscal federalism.
• Discuss the impact of the GST regime on the scope of taxes still governed by Article 269.

FAQ

Q1. What taxes fall under Article 269? Taxes on the sale or purchase of goods (other than newspapers) and taxes on the consignment of goods, where the transaction occurs in the course of inter-State trade or commerce, except supplies now covered by the separate GST mechanism under Article 269A.

Q2. Who collects Article 269 taxes, and who gets the money? The Government of India levies and collects them, but the entire net proceeds are assigned to the states in which the tax is leviable — they never form part of the Consolidated Fund of India.

Q3. How are the proceeds divided among states? According to principles of distribution formulated by Parliament by law, as provided in Article 269(2).

Q4. How is Article 269 different from Article 268? Under Article 268 the Union levies but the states themselves collect and keep the proceeds; under Article 269 the Union both levies and collects, then assigns the proceeds to states.

Q5. How does Article 269A relate to Article 269? Article 269A was inserted by the 101st Amendment to specifically govern GST on inter-State trade or commerce, which is why Article 269(1) now excludes matters "provided in article 269A."

Quick Revision

• Article 269 — Union levies and collects, but 100% of net proceeds go to states.
• Applies to inter-State sale/purchase and consignment taxes, excluding matters now under Article 269A (GST).
• Assignment operative from 1 April 1996 per the 80th Amendment Act, 2000.
• Distribution among states follows Parliament-formulated principles under law.
• Article 268 = states collect; Article 269 = Union collects but assigns all; Article 270 = shared pool.

Sources

• The Constitution of India, Articles 268, 269, 269A, 270, 271 — Ministry of Law and Justice, legislative.gov.in.

Further Reference

For deeper reading on this topic and the wider polity syllabus, these standard works are recommended:

• M. Laxmikanth, Indian Polity (McGraw Hill) — the standard UPSC handbook.
• D.D. Basu, Introduction to the Constitution of India (LexisNexis) — authoritative constitutional-law treatment.
• The Constitution of India — Bare Act — the official text.