The 101st Constitutional Amendment Act, 2016, is a landmark constitutional amendment that introduced the Goods and Services Tax (GST) regime in India. It was enacted to solve the problem of a fragmented indirect tax system, which consisted of multiple Central and State taxes like excise duty, service tax, and VAT, leading to a cascading effect and internal trade barriers. The Act received the President's assent on September 8, 2016, and the GST was implemented from July 1, 2017, fundamentally restructuring the country's fiscal federalism.
The Act works by inserting and amending several articles to create a unified, destination-based tax system. Key provisions include the insertion of Article 246A, which grants concurrent power to both Parliament and State Legislatures to make laws with respect to GST, though Parliament retains exclusive power over inter-State trade. Article 269A provides for the levy and collection of GST on inter-State supplies (Integrated GST) by the Central Government, with the revenue to be apportioned between the Centre and States.
Crucially, the Act inserted Article 279A, which established the GST Council, a constitutional body chaired by the Union Finance Minister and comprising State Finance Ministers. The Council institutionalizes cooperative federalism in taxation, as its decisions require a three-fourths majority, with the Centre holding one-third and the States collectively holding two-thirds of the voting weight. The amendment replaced numerous taxes and also provided for a five-year compensation guarantee to States for revenue loss arising from the GST implementation, which lasted from 2017–2022. Existing provisions were also changed, such as the omission of Article 268A (relating to service tax) and the amendment of Article 270 to include GST in the divisible pool of taxes.