Under Part XII ,Article 286 of Indian Constitution is a key provision that regulates the power of state governments in matters of taxation. It limits their authority to impose taxes on transactions that occur beyond their borders or during import/export activities. This helps avoid double taxation and preserves the free flow of goods.

Article 286 of the Indian Constitution also empowers Parliament to decide when a sale or purchase takes place in such contexts. This includes inter-state, import, and export transactions. Additionally, Parliament can set rules on how these taxes are levied—such as the levy system, tax rates, and even the treatment of hire-purchase agreements.

The implementation of GST (Goods and Services Tax) significantly reshaped how Article 286 of Constitution works today . It shifted the power to the Union Government for inter-state supplies . With these changes, art 286 remains a vital part of constitutional provisions relating to taxation, balancing federal powers and economic unity across India. Explore in-depth analysis of other Constitutional Articles.

Article 286 of Indian Constitution

Restrictions as to imposition of tax on the sale or purchase of goods

(1)No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place.-

(a)outside the State; or

(b)in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2)Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

(3)Any law of a State shall, in so far as it imposes, or authorises the imposition of,--

(a)a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or

(b)a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.

Note: "The information provided above has been sourced from the official website, i.e., Indian Code. While the content has been presented here for reference, no modifications have been made to the original laws and orders" 

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Article 286 of Indian Constitution prevents states from taxing goods sold outside their territory or in the course of import or export. It protects businesses and consumers from being taxed multiple times for the same transaction and keeps trade across borders smooth.

Clause (1)(a) bars state taxation on goods sold outside state borders. Clause (1)(b)—often referred to as article 286(1)(b) of the constitution of india—prevents states from imposing taxes on international trade. These clauses help avoid conflicts among states and between states and the Union.

Article 286(2) gives Parliament the power to define when a sale or purchase is deemed to take place in inter-state or foreign trade. This ensures a uniform approach nationwide. Importantly, Parliament also has the authority to set restrictions and conditions on the levy system, tax rates, and related aspects, such as delivery under hire-purchase agreements.

Following the introduction of GST, article 286 of constitution of India was amended. Now, the Union Government levies GST on inter-state supplies of goods and services. Despite reforms, article 286 of the Indian Constitution continues to shape India's taxation framework by defining what states can and cannot tax.

Article 286 of Indian Constitution Key Points 

The key points relating to article 286 of Constitution of India are as follows, they are-

• Restrictions on State Taxation:
  State governments cannot impose taxes on sales or purchases made outside their borders or during import/export. This supports fair trade and avoids dual taxation.
• Parliamentary Authority:
  Under article 286(2), Parliament decides when a sale occurs in these restricted zones—especially in inter-state trade and international commerce.
• Levy System and Tax Rates :
  Parliament sets restrictions on how taxes are levied, the rate structure and conditions including provisions for hire-purchase deliveries.
• Impact of GST:
  With the 101st Amendment, GST replaced multiple indirect taxes. The Union Government now collects GST on inter-state transactions. Thus, article 286 of constitution aligns with GST laws while still guiding taxation limits.

Some of the landmark cases relating to Article 286 of Constitution of India are explained below, they are -

1. Bengal Immunity Co. Ltd. v. State of Bihar (1955)

The Court ruled that states cannot tax inter-state sales, upholding article 286(1)(a) and affirming that Parliament alone can regulate such sales. This decision clarified article 286 constitution of India early in independent India.

2. State of Bombay v. United Motors (1953)

The ruling on advance tax led to confusion, prompting the Sixth Constitutional Amendment. It ultimately reinforced the supremacy of Parliament under article 286 2 of Indian Constitution.

3. State of Madras v. Gannon Dunkerley & Co. (1958)

The Court held that a works contract is not a sale narrowing what can be taxed under article 286 and ensuring clarity in contracts involving goods and services.

4. K.G. Khosla & Co. v. Deputy Commissioner (1966)

The Court reaffirmed that import and export transactions are protected under article 286(1)(b) of the constitution of India, shielding them from state-level taxation.

Article 286 of Indian Constitution Significance 

Article 286 of Constitution of India plays a vital role in maintaining harmony in tax practices across states and international borders . It ensures that no state taxes transactions outside its legal boundaries, which is critical for a healthy federal structure.

This article also gives Parliament the central role in defining what qualifies as inter-state, import, or export sales under article 286 2 of Indian constitution. By doing so, it ensures tax uniformity and legal clarity for businesses, traders, and policymakers.

The inclusion of levy conditions, tax rates, and delivery mechanisms under art 286 makes it more comprehensive. It’s not just a rule for taxation limits but also a framework for defining valid taxation mechanisms.

With the rollout of GST, the role of article 286 of the Indian Constitution shifted but didn’t fade. It still prevents states from taxing beyond their borders and supports a cohesive national market, which is a core principle of modern taxation policy in India.

Article 286 of Indian Constitution Developments and Amendments

Two constitutional amendments have shaped Article 286 of Indian Constitution significantly.

Sixth Constitutional Amendment (1956)

This was passed after multiple conflicting judgments. It clarified Parliament’s role in defining when a sale occurs in the context of inter-state and international transactions. It brought precision to article 286 2 of Indian Constitution, allowing uniform interpretation and application.

The amendment helped the Parliament pass the Central Sales Tax Act, which governed inter-state trade for decades. It strengthened the role of the Centre in defining taxable events under article 286 constitution of India.

101st Constitutional Amendment (2016)

This amendment introduced GST, overhauling India’s indirect tax system. To support this reform, article 286 of Constitution of India was amended. The words “sale or purchase” were replaced with “supply of goods or services or both.”

Now, inter-state supplies fall under Union Government control. States no longer impose taxes on such transactions, but article 286 still sets the legal limits. The updated art 286 aligns with GST but continues to prevent tax abuse and overlapping jurisdiction.

Both amendments show how constitutional provisions relating to taxation, including article 286(1)(b) of the constitution of India, evolve to support economic reforms while protecting federal balance.

Conclusion 

Article 286 of Indian Constitution continues to be a key component of India’s tax governance. It protects the freedom of trade by preventing states from taxing cross-border and foreign transactions. It empowers Parliament to define rules under article 286(2) and maintain uniformity.

Landmark judgments and major amendments have defined its scope. From clarifying works contracts to protecting import/export transactions, courts have shaped how article 286 of the Constitution of India functions. The Sixth and 101st Amendments further refined its application in a modern economy.

Even with GST in force, article 286 of Constitution plays a guiding role. It ensures that states cannot breach constitutional limits and supports harmonized taxation under a centralized framework. It also helps define tax boundaries, rates, and systems—especially through article 286 1 b of the constitution of India and article 286 2 of Indian Constitution.

In sum, 286 Article is a protective shield for taxpayers and a balancing tool for the federal structure. As India grows economically, Article 286 of the Indian Constitution remains crucial for legal consistency, fairness, and cooperative federalism in the tax regime.