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EconomyConstitutional amendments2016

101st Amendment

Introduced the Goods and Services Tax.

Written by Pratidin; every fact checked by a separate review before publishing. How we work

Created the GST Council under Article 279A.

The old Parliament House (Sansad Bhavan), New Delhi.
The old Parliament House (Sansad Bhavan), New Delhi. Nikhilb239, CC BY-SA 4.0, via Wikimedia Commons
Practise this in the app: flashcards, quiz and a timed answer
Prelims

Quick recall

Which Article gives concurrent power to levy GST?
Article 246A.
Which Article creates the GST Council?
Article 279A.
Who chairs the GST Council?
The Union Finance Minister.
What majority do GST Council decisions need?
Three-fourths of weighted votes.
What share of votes does the Centre have?
One-third.
When did GST come into force?
1 July 2017.

Asked before in UPSC

Recurring theme: GST and cooperative fiscal federalism

Mains
  1. 2025 · GS2 · 15 marks

    Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?

    GST under the 101st Amendment is the biggest recent reform in Centre-State financial relations.

  2. 2023 · GS2 · 15 marks

    Explain the significance of the 101st Constitutional Amendment Act. To what extent does it reflect the accommodative spirit of federalism?

    Asks directly about the 101st Amendment and the GST Council as an instrument of shared fiscal sovereignty.

  3. 2020 · GS3 · 15 marks

    Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions?

    Compensation to States for five years was promised under the 101st Amendment and enacted through this Act.

  4. 2019 · GS3 · 10 marks

    Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.

    Tests which taxes the 101st Amendment framework subsumed and how GST affected revenues.

  5. 2017 · GS2 · 15 marks

    Explain the salient features of the constitution (One Hundred and First Amendment) Act, 2016. Do you think it is efficacious enough 'to remove cascading effect of taxes and provide for common national market for goods and services'?

    Asks directly for the salient features of the 101st Amendment and whether GST creates a common national market.

The basics

Why it matters

The 101st Amendment (2016) introduced the Goods and Services Tax, replacing many Central and State indirect taxes with one system and creating the GST Council.

1 July 2017
Date GST came into force
Under the 101st Amendment.

How GST works

GST is shared between the Centre and States.

GST structure
  1. 1CGSTCentral tax on intra-State supplies
  2. 2SGSTState tax on intra-State supplies
  3. 3IGSTLevied by the Centre on inter-State supplies
  4. 4GST CouncilArticle 279A; Union FM chairs

You now know

  • The 101st Amendment (2016) enabled GST, in force from 1 July 2017.
  • Article 246A gives both Centre and States power to levy GST.
  • Article 279A created the GST Council, chaired by the Union Finance Minister.
  • The Centre has one-third of votes and States two-thirds; decisions need three-fourths.

Go deeper

In one line: GST created one national market for goods and services and a new forum for cooperative federalism.

Why it matters for UPSC

GST and the GST Council are core economy and federalism topics.

The core idea

States gave up many taxing powers in return for a share in a pooled tax decided jointly in the GST Council. A five-year GST compensation was promised for revenue losses.

Where to go next

In one line: GST improved tax compliance but reduced States' fiscal autonomy.

Gains

Cascading taxes removed, e-way bills and a larger tax base.

Concerns

Multiple rates, the Centre's effective veto, and loss of State taxing power after GST compensation ended in 2022. The Supreme Court held in 2022 that GST Council recommendations are persuasive, not binding.

Where to go next

GST Council

Joint decision-making on GST

In one line: The GST Council recommends GST rates, exemptions and rules.

Composition

Union Finance Minister, Union MoS Finance, and State Finance Ministers.

Votes

Centre one-third, States two-thirds; decisions need three-fourths.

Where to go next

GST Council: every story that connects to it (2)

GST compensation

Guaranteed revenue to States

In one line: States were guaranteed compensation for five years for any GST revenue shortfall, assuming 14% annual growth.

Funding

A compensation cess on luxury and sin goods.

End

The guarantee ended in June 2022; the cess was extended to repay loans.

Where to go next

Prelims-style quiz

  1. The GST Council was created under:

    1. Article 280
    2. Article 279A
    3. Article 246A
    4. Article 269A
    Show answer

    Answer: (b) Article 279A. Article 279A.

  2. Consider the following:
    1. The Centre holds one-third of the votes in the GST Council.
    2. GST Council decisions need a simple majority.
    Which of the statements given above is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Show answer

    Answer: (a) 1 only. Decisions need three-fourths of weighted votes.

  3. IGST is levied on:

    1. Intra-State supplies
    2. Services only
    3. Exports only
    4. Inter-State supplies
    Show answer

    Answer: (d) Inter-State supplies. Inter-State supplies and imports.

  4. GST came into force on:

    1. 1 April 2018
    2. 1 April 2016
    3. 1 July 2017
    4. 1 January 2017
    Show answer

    Answer: (c) 1 July 2017. 1 July 2017.

Syllabus

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