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.
STATEMENT OF OBJECTS
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
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
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 pooled.
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:-
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;
the Central Government can pursue tax reforms
the need to consider whether a tax is sharable in
states or not;
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
part of 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 Centres exclusive needs by keeping
Cesses and Surcharges outside the pooling arrangement.
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
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
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 is concerned.
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 as follows:-
1. Short title: This Act may be called the Constitution (Eightieth Amendment) Act, 2000.
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).
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
takes 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:
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:
(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 clause (3).
(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 omitted.
(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 article 270.