Currently, the fiscal powers between the Centre and the
States are clearly demarcated in the Constitution with
almost no overlap between the respective domains. The
Centre has the powers to levy tax on the manufacture of
goods (except alcoholic liquor for human consumption,
opium, narcotics etc.) while the States have the powers
to levy tax on the sale of goods. In the case of inter-State
sales, the Centre has the power to levy a tax (the Central
Sales Tax) but, the tax is collected and retained entirely
by the States. As for services, it is the Centre alone that
is empowered to levy service tax.
Introduction of the GST required amendments in the
Constitution so as to simultaneously empower the Centre
and the States to levy and collect this tax. The Constitution
of India has been amended by the Constitution (one hundred
and first amendment) Act, 2016 recently for this purpose.
Article 246A of the Constitution empowers the Centre and
the States to levy and collect the GST.