Report No. 61

Intro.-3. Constitutional position.- The letter of reference1 mentions several topics. Before discussing them, a few words about the power to levy a tax on the sale of goods would be relevant. Under the Constitution, the power to levy tax on the sale or purchase of goods is referable to the legislative power vested in the States, by virtue of the specific entry in the State list.2 But the power to levy such tax on inter-State sales is vested in the Union Parliament.3 Again, there are certain restrictions on the powers of the States4. We shall presently proceed to explain this apparently complex scheme. The reasons for such a complicated scheme will also be apparent from the discussion that follows.

1. Para. Intro. 1, supra.

2. Constitution, 7th Schedule, State List, entry 54.

3. Constitution, 7th Schedule, Union List, entry 92A.

4. See para. Intro. 12, Infra.