Article 286 of the Costitution of India with Case law
Article 286 of the Constitution of India
Title: Restrictions as to imposition of tax on the sale or purchase of goods
Text (Simplified Summary):
Clause (1):
A State shall not impose a tax on the sale or purchase of goods:
Outside the State, or
In the course of import/export (i.e., into or out of India), or
In the course of inter-State trade or commerce.
Clause (2):
Parliament may formulate principles for determining:
When a sale/purchase is considered inter-State, or
Import/export related, or
Takes place outside the State.
Clause (3):
Any law made by a State which imposes tax on goods declared to be of special importance in inter-State trade (declared goods), shall be subject to restrictions and conditions laid down by Parliament.
Purpose of Article 286:
To protect the freedom of trade and commerce across India by:
Preventing multiple taxation by different States on the same transaction.
Clarifying the taxing boundaries between Centre and States.
Ensuring uniformity in the treatment of inter-State sales, exports, and imports.
Important Constitutional Amendments:
6th Amendment (1956): Inserted clarifications and gave Parliament power to formulate principles under Clause (2).
101st Amendment (2016): Related to the introduction of GST; Article 286 continues to apply, but GST laws now govern most indirect taxation.
Important Case Laws on Article 286:
🧑⚖️ 1. State of Bombay v. United Motors (India) Ltd., AIR 1953 SC 252
Issue: Whether Bombay could tax sales that began in another State but concluded in Bombay.
Held:
A sale in the course of inter-State trade is not taxable by any State, except as permitted by law made under Article 286(2).
Emphasized that States cannot override constitutional limitations on taxing powers.
🧑⚖️ **2. Bengal Immunity Co. Ltd. v. State of Bihar, AIR 1955 SC 661
Landmark Judgment
Held:
Reinforced that no State can tax inter-State sales, even if part of the transaction occurs within its boundaries.
The Supreme Court strictly interpreted Article 286 to uphold inter-State trade freedom.
🧑⚖️ **3. The State of Tamil Nadu v. Cement Distributors Pvt. Ltd., (1973) 3 SCC 66
Held:
Parliament has the exclusive power to determine what constitutes an inter-State sale under Article 286(2).
State laws that go beyond such principles will be unconstitutional.
🧑⚖️ **4. K.G. Khosla & Co. v. Deputy Commissioner of Commercial Taxes, AIR 1966 SC 1216
Held:
Tax imposed on goods moving inter-State was struck down as it violated Article 286(1)(b).
Confirmed movement of goods across States = inter-State sale.
🧑⚖️ **5. Hindustan Zinc Ltd. v. State of Rajasthan, (2004) 6 SCC 364
Held:
Declared goods (under Article 286(3)) cannot be taxed by States beyond the restrictions set by Parliament under the Central Sales Tax Act.
Relevance After GST:
Though GST replaced many indirect taxes, Article 286 still applies to ensure:
GST on inter-State supplies is handled by IGST (Integrated GST),
States cannot impose individual taxes on inter-State or export/import sales.
Conclusion:
Article 286 protects the integrity of India’s common market by:
Restricting the taxing powers of States on inter-State or foreign trade,
Giving Parliament overriding authority to define when and how tax can be levied on certain goods,
Preventing tax-related barriers to free trade across Indian States.
✅ Key Takeaway: States cannot tax inter-State sales or export/import transactions, and must follow principles framed by Parliament under Article 286.
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