Duties levied by the Union but collected and appropriated by the States

Draft Article 249, Draft Constitution of India 1948

(1) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected-

(a) In the case where such duties are leviable within any State for the time being specified in Part II of the First Schedule, by the Government of India, and

(b) In other cases, by the States within which such duties are respectively leviable.

(2) The proceeds in any financial year of any such duty leviable in that year within any State shall not form part of the revenues of India, but shall be assigned to that State.

Article 268, Constitution of India 1950

(1) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected—

Draft Article 249 (Article 268, Constitution of India 1950) was discussed on 4 August 1949 and 5 August 1949. It was the first in a series of provisions that laid down how revenue should be distributed between the Union and the States. This specific provision permitted the Union government to impose certain taxes such as stamp duties which would be collected by and assigned to the States.  For Union Territories, the taxes would be collected by the Union Government.

A Member opposed the Draft Article as he believed that all taxes should be imposed and collected by the Union Government. He suggested that an independent authority be set up to allocate funds to each State based on its needs.  Another concerned Member remarked that the Centre should not misuse such provisions and ensure a just distribution of revenue. There was no further discussion on the Draft Article.

Minor technical amendments were adopted.

Draft Article 249, as amended was adopted on 5 August 1949.