Introduction

The Indian Constitution is a comprehensive document that lays down the framework for the governance of the country. It outlines the powers and responsibilities of the central government, state governments, and the relationship between them. One such provision is Article 268A, which deals with the levy and collection of service tax by the Union government and its appropriation between the Union and the States.

Understanding Article 268A

Article 268A was introduced through the 88th Constitutional Amendment Act, 2003. It provides for the levy and collection of service tax by the Union government on certain services, and the manner in which it is to be appropriated between the Union and the States. Prior to the introduction of this article, there was no specific provision in the Constitution regarding the levy and collection of service tax.

Levy and Collection of Service Tax

Article 268A empowers the Union government to levy and collect service tax on services provided or agreed to be provided by a service provider. The term "service" has been defined to include everything other than goods, money, and immovable property. The service tax is levied on the value of the taxable service at such rate as may be prescribed by the Parliament.

The Union government has the authority to make laws for the levy and collection of service tax, including the power to determine the rates of tax, exemptions, and the procedure for collection. The provisions relating to the levy and collection of service tax are contained in the Finance Act, which is passed by the Parliament every year.

Appropriation of Service Tax

Article 268A also provides for the appropriation of service tax between the Union government and the States. The proceeds of the service tax levied and collected by the Union government are divided between the Union and the States in the manner prescribed by the Parliament. The Parliament has the power to make laws to provide for the manner of appropriation of the service tax.

The service tax collected by the Union government is not automatically shared with the States. The Parliament has the discretion to determine the share of the States in the service tax proceeds. The manner of appropriation is determined based on various factors such as the nature of the services, the geographical location of the service provider and the recipient, and the economic capacity of the States.

Significance of Article 268A

Article 268A plays a crucial role in the fiscal federalism of India. It ensures that the Union government has the power to levy and collect service tax, which is an important source of revenue for the central government. At the same time, it also provides for the sharing of this revenue with the States, which helps in the development and functioning of the state governments.

The introduction of Article 268A has brought clarity and certainty to the levy and collection of service tax. It has provided a constitutional framework for the Union government to impose service tax and has also established the mechanism for the appropriation of the tax between the Union and the States. This has helped in avoiding any ambiguity or disputes regarding the authority of the Union government to levy and collect service tax.

Conclusion

Article 268A of the Indian Constitution is an important provision that deals with the levy and collection of service tax by the Union government and its appropriation between the Union and the States. It empowers the Union government to levy and collect service tax on certain services and provides for the sharing of this revenue with the States. This provision has brought clarity and certainty to the taxation system and has strengthened the fiscal federalism of India.