Under the earlier regime, the power to levy indirect taxes was split rigidly between Centre and States:
Tax
Levied On
Authority
Excise Duty
Manufacturing
Central Government
Service Tax
Services
Central Government
VAT
Sale within State
State Government
CST
Inter-state Sale
Central Government (collected by State)
### The Constitutional Problem
GST is a single tax on goods AND services, levied by both Centre and State on the same transaction. Under the original Constitution:
States had no power to tax services.
Centre had no power to tax sale of goods within a State.
So, neither could unilaterally levy GST without trespassing on the other's domain.
### The Solution – 101st Constitutional Amendment Act, 2016
A new Article 246A was inserted to give concurrent power to both Parliament and State Legislatures to levy GST. This was the constitutional bedrock that made GST possible.
> 💡 Key takeaway: Article 246A is the enabling provision — it grants the power to levy GST. The actual levy happens through CGST/SGST/UTGST/IGST Acts.
### Consequence: Two Types of Supply Emerge
Because both Centre and State now have power, every supply must be classified:
Intra-State Supply → CGST + SGST/UTGST (Dual GST)
Inter-State Supply → IGST (collected by Centre, apportioned later)
Worked example
### Example 1
Example – Intra-State Supply (Dual GST)
Mr. Ram (Rajasthan) sells goods worth ₹1,00,000 to Mr. Raju (Rajasthan). GST rate = 18%.
Since both are in the same State, this is an Intra-State Supply:
CGST @ 9% = ₹9,000 → Central Government
SGST @ 9% = ₹9,000 → State Government (Rajasthan)
Total GST = ₹18,000
Observe: two taxes on a single transaction — this is the Dual GST Concept.
### Example 2
Example – Inter-State Supply (IGST)
Mr. Ram (Rajasthan) sells goods worth ₹1,00,000 to Mr. Raju (Punjab). GST rate = 18%.
Since the supplier and recipient are in different States, this is an Inter-State Supply:
IGST @ 18% = ₹18,000 → collected by Central Government
Later apportioned: ₹9,000 to Centre and ₹9,000 to Punjab (consuming State)
This reflects GST being a destination-based / consumption-based tax.
⚠️ Common exam mistakes
Confusing Article 246 (the old residuary list system) with Article 246A (concurrent GST power) — only 246A enables GST.
Thinking IGST is shared 50:50 with the origin State. It is actually apportioned to the consuming (destination) State.
Assuming States lost all power to levy indirect tax — they retained power to levy VAT on excluded items like petroleum products and alcoholic liquor for human consumption.
Forgetting that the constitutional amendment came first (101st CAA) — without it, no GST Act could have been validly enacted.
Bare-Act text Article 246A (inserted by 101st Constitutional Amendment Act, 2016) · Constitution of India · click to expand
Article 246A: Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.