THE CONSTITUTION (EIGHTIETH AMENDMENT) ACT, 1999
Statement of Objects and Reasons appended to the Constitution (Eighty-Ninth
Amendment) Bill, 2000 which was enacted as the Constitution (Eightieth
Amendment) Act, 2000.
OF OBJECTS AND REASONS
The Tenth Finance Commission had submitted its report on the 26th November,
1994 for the period of five years, i.e.,from 1995-96 to 1999-2000. The said
report was laid on the table of both the Houses of Parliament on the 14th
March,1995. One of the recommendations of the Commission that has been under
consideration of the Government is an alternative scheme of sharing of the
proceeds of certain Union taxes and duties between the Union and the States.
2. The alternative scheme envisages that twenty-six per cent out of the gross
proceeds of Union taxes and duties (excluding stamp duty, excise duty on
medicinal toilet preparations, Central Sales Tax,Consignment tax, cesses
levied for specific purposes under any law made by Parliament and Surcharge)
is to be assigned to the States in lieu of their existing share in
income-tax, basic excise duties, special excise duties and grants in lieu of
tax on railway passenger fares.
3. In addition, three per cent share in the gross proceeds of all Central
taxes and duties (excluding stamp duty, excise duty on medicinal/toilet
preparations, Central Sales Tax, Consignment tax, cesses levied for specific
purpose under any law made by Parliament and Surcharge) is to be assigned to
the States in lieu of their existing share in Additional Excise Duties in
lieu of Sales Tax on tobacco, cotton and sugar. The commission had proposed
that tobacco, cotton and sugar may continue to be exempt from Sales Tax and
the Additional Excise Duties in lieu of Sales Tax on these items may be
merged with the Basic Excise Duties.
4. Whether the alternative scheme would be more gainful to the Centre or to
the States vis-à-vis existing arrangements would entirely depend on the
relative growth in the Collection of various Central taxes and duties to be
5. The benefits of the scheme have been listed by the Commission in para
13.2. and 13.3 and 13.18 of their reports. These areas follows:-
(i) with a given share being
allotted to the States in the
revenues from Central taxes, the States will be
share the aggregate buoyancy of Central taxes;
(ii) the Central Government
can pursue tax reforms
the need to consider whether a tax is sharable in
(iii) the impact of fluctuations in Central tax revenues would
alike by the Central and the State Governments;
(iv) Should the taxes
mentioned in articles 268 and/or 269 from
this arrangement, there will be greater likelihood of
(v) the progress of
reforms will be greatly facilitated if the
tax sharing arrangement is enlarged so as to give
certainty of resource flows to, and increased
in tax reform.
6. The above scheme recommended by the Commission is in national interest as
it helps to remove a perceived inter-tax in the tax mobilisation effort of
the Government of India while leaving sufficient flexibility for meeting
Centre’s exclusive needs by keeping Cesses and Surcharges outside the pooling
7. A Discussion Paper bringing out various aspects of the scheme was laid on
the table of both the Houses of Parliament on the 20th December, 1996 with a
view to generate an informed debate.
8. On the basis of a consensus reached in the Third Meeting of the
inter-State Council held on the 17th July, 1997, the then Government had
agreed in principle to accept the scheme recommended by the Tenth Finance
Commission subject to certain modifications.
9. The Government had decided to ratify the decision taken by the previous
Government according in principle approval for the scheme recommended by the
Tenth Finance Commission with some modifications.
10. Firstly, the percentage share of State is to be reviewed by the
successive Finance Commissions instead of freezing it for fifteen years as
suggested by the Tenth Finance Commission.
11. Secondly, Government had decided to change the sharing of “gross
proceeds" as recommended by the Tenth Finance Commission to the sharing of
“net proceeds" in order to maintain consistency between articles 270, 279 and
280 of the Constitution. However, this will not result in any consequent loss
to the States because the Government has also simultaneously decided to
compensate the States by suitably enhancing the percentage share beyond 29%.
12. Thirdly, as intended by the Commission, no amendment is sought to be done
in article 271, which authorize the Central Government to levy surcharge on
Central taxes and duties for the purpose of the Union.
13. The scheme will be effective from 1st April, 1996. The percentage share
of net proceeds during 1996-97 to 1999-2000 will be such that the States’
share is 29% of the gross proceeds. The recommendations of the 11th
Finance Commission, which has been mandated to give its final report by 30th
June, 2000, will cover the 5 years period w.e.f. 1st April, 2000.
14. In order to implement this decision, this Bill seeks to amend article
269, 270 and 272 of the Constitution so as to bring several Central taxes and
duties like Corporation tax and Customs duties at par with personal
income-tax as far as their constitutionally mandated sharing with the States
The 25th February, 2000.
THE CONSTITUTION (EIGHTIETH AMENDMENT) ACT, 2000
[9th June, 2000]
An Act further to amend the Constitution of India.
BE it enacted by Parliament in the Fifty-First Year of the Republic of India
1. Short title: This Act may be called the Constitution (Eightieth Amendment)
2. Amendment of article 269: In article 269 of the Constitution, for clauses
(1) and (2), the following clauses shall be substituted, namely:-
`'(1) Taxes on the sale or purchase of goods and taxes on the consignment of goods
shall be levied and collected by the Government of India but 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 provided in clause (2).
Explanation.-For the purposes of this clause; -
(a) the expression “taxes on the sale or purchase of
goods" shall mean taxes on sale or purchase of goods
other than newspapers, where such sale or purchase
takes place in the course of inter-State trade or
(b) the expression “taxes on the
consignment of goods"
shall mean taxes on the consignment of goods (whether
the consignment is to the person making it or to any
other person), where such consignment takes place
place in the course of inter-State trade or
(2) The net proceeds in any financial year of any such tax, except in so far
as those proceeds represent proceeds attributable to Union territories, shall
not form part of the Consolidated Fund of India, but shall be assigned to the
State within which that tax is leviable in that year, and shall be
distributed among those States in ccordance with such principles of
distribution as may be formulated by Parliament by law’.
3. Substitution of new article for article 270:
For article 270 of the Constitution, the following article
shall be substituted and shall be deemed to have been substituted with effect
from the 1st day of April, 1996, namely:-
Taxes levied and distributed between the Union and the States:
`270. (1) All taxes and duties referred to in the Union
List, except the duties and taxes referred to in articles 268 and 269,
respectively, surcharge on taxes and duties referred to in article 271 and
any cess levied for specific purposes under any law made by Parliament shall
be levied and collected by the Government of India and shall be distributed
between the Union and the States in the manner provided in clause (2).
(2) Such percentage, as may be prescribed, of the net proceeds of any such
tax or duty in any financial year shall not form part of the Consolidated
Fund of India, but shall be assigned to the States within which that tax or
duty is leviable in that year, and shall be distributed among those States in
such manner and from such time as may be prescribed in the manner provided in
(3) In this article, “Prescribed" means -
(i) until a Finance Commission has been constituted,
prescribed by the President by order, and
(ii) after a Finance Commission has been constituted,
prescribed by the President by order after considering
the recommendations of the Finance Commission.’
4. (1) Omission of article 272 : Article 272 of the Constitution shall be
(2) Notwithstanding anything contained in sub-section (1), where any sum
equivalent to the whole or any part of the net proceeds of the Union duties
of excise including additional duties of excise which are levied and
collected by the Government of India and which has been distributed as
grants-in-aid to the States after the 1st day of April, 1996, but before the
commencement of this Act, such sum shall be deemed to have been distributed
in accordance with the provisions of article 270, as if article 272 had been
omitted with effect from the 1st day of April, 1996.
(3) Any sum equivalent to the whole or any part of the net proceeds of any
other tax or duty that has been distributed as grants-in-aid to the States
after the 1st day of April, 1996 but before the commencement of this Act
shall be deemed to have been distributed in accordance with the provisions of