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Statement of Objects and Reasons

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....is given in the clause that "a sale or purchase shall be deemed to have taken place in the State in which goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State". Then, under clause (2), a State is debarred from imposing the tax on inter-State sales except in so far as Parliament may otherwise provide. Lastly, under clause (3), Parliament is authorised to declare the goods which are essential to the life of the community, and when such a declaration has been made, any law made by a State legislature imposing a tax on the sale or purchase of those goods has to receive the President's assent in order to be effective. High judicial authorities have found the in....

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....sales tax on these goods, the result was a wide disparity from State to States, not only in the range of exempted goods, but also in the rates applicable to them. The Taxation Enquiry Commission, after examining the problem with great care and throughness, have made certain recommendations which may be summarised as follows. In essence, sales tax must continue to be a State source of revenue and its levy and administration must substantially pertain to the State Governments. The sphere of power and responsibility of the State may, however, be said to end, and that of the Union to begin, when the sales tax of one State impinges, administratively on the dealers, and fiscally on the consumers, of another State. Broadly, therefore, inter-State....

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....gislative and executive power of the Union, and to make entry 54 of the State List "subject to the provisions" of this new entry. In clause 3, it is proposed to add these taxes to the list given in clause (1) of article 269, so that, although they will be levied and collected in accordance with an Act of Parliament, they will not form part of the Consolidated Fund of India, but will accrue to the States themselves in accordance with such principles of distribution as may be formulated by Parliament by law. A further provision is proposed in article 269 expressly empowering Parliament to formulate by law principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. It is p....