Does the Parliament of India have powers to make law on GST for Union territories WITHOUT Legislature? Model GST Law also does not provide any clarity on applicability of GST in such Union territories.

1. Amitabh Khemka, COO,
Sthir Advisors LLP
Union territories without Legislature – how GST can apply
Date : September 23 2016
1. Power to make laws with respect to GST
As per the Constitution of India[1], the Parliament and the Legislature of every
State have the power to make laws with respect to goods and services tax
(GST); however, Parliament has exclusive power to make such laws for inter-
State trade or commerce[2]. ‘State’ is defined[3] for this purpose to include a
Union territory with Legislature. GST will mean[4] any tax on supply of goods,
or services, or both except …. .
2. Issue arising
As the definition of ‘State’ for the purposes of GST does not include the Union territory WITHOUT Legislature,
the question that arises is – will GST apply on supplies in/from/to the Union territories without Legislature?
3. Union territory
India is a Union of States. The territory of India comprises of the territories of the States and the Union
territories[5]. Currently, there are 29 States and seven Union territories; of which, two (Delhi and Puducherry)
are having Legislature. Union territory[6] is administered by the President of India, acting through an
administrator appointed by him.
4. Power to make laws
Currently, the subject matter of laws to be made[7] by Parliament and by the Legislature of States is as follows:
Art. 246(1) Parliament Exclusive power to make laws with respect to any of the
matters enumerated in List I (Union List)
Art. 246 (2) Legislature of any State Exclusive power to make laws for such State with respect
to any of the matters enumerated in List II (State List)
Art. 246 (3) Parliament and
Legislature of any State
Power to make laws with respect to any of the matters
enumerated in List III (Concurrent List)
Art. 246 (4) Parliament Power to make laws with respect to any matter for any
part of the territory of India which is not included in
the State, including the matters enumerated in State List
Currently, the Parliament also has exclusive power[8] to make any law with respect to any matter which is not
enumerated in the State List or Concurrent List, including making any law imposing a tax. GST is not be
enumerated in the State List or Concurrent List.
5. What is a ‘State’?
As per General Clauses Act, 1897, ‘State’ shall mean a State specified in the First Schedule to the Constitution
and shall include a Union Territory.
‘State’ has been defined differently in different contexts, within the Constitution of India. In Explanation to
Article 3, ‘State’ is defined as – In this article, in clauses (a) to (e), ‘State’ includes a Union territory, but in the
proviso, ‘State’ does not include a Union territory.
On examining the subject matter of laws to be made by Parliament and by the Legislature of States (depicted
in the Table earlier), the Apex Court in case of T.M. Kanniyan vs. Income-Tax Officer, Pondicherry[9] held that
‘State’ in Article 246 doesn’t include Union territories.
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2. While interpreting Entry 80 of the Union List, Apex Court in case of Management of Advance Insurance Co.
Ltd. vs. Gurudasmal and Ors.[10] held that State would include Union territory. The Court relied upon the
definition of ‘State’ under the General Clauses Act, 1987.
Entry 80 - Extension of the powers and jurisdiction of members of a police force belonging to any State to any
area outside that State, but not so as to enable the police of one State to exercise powers and jurisdiction in
any area outside that State without the consent of the Government of the State in which such area is situated;
extension of the powers and jurisdiction of members of a police force belonging to any State to the railway
areas outside that State.
However, ‘State’ for the purposes of GST does not include a Union territory without Legislature, as ‘State’ for
said purpose is specifically defined to include a Union territory with Legislature.
6. Power of make law with regards to Union territories
The President of India has general power[11] of making regulations for the peace, progress and good
government of the specified Union territories. The Legislative Assembly of the Union territory with Legislature
has powers to make laws with respect to any of the matters enumerated in the State List or in the Current List
for matters applicable to such Union territory.
In respect of the power of the Parliament, the Apex Court in case of T.M. Kanniyan vs. Income-Tax Officer,
Pondicherry held as follows:
Article 240 of the Constitution confers on the President a general power of making regulations for the peace,
progress and good government of the specified Union territories. .… …. The regulation when promulgated by
the President has the stone force and effect as an Act of Parliament which applies to that territory. The
President can thus make regulations on all subjects on which Parliament can make laws for the territory.
Parliament has plenary power to legislate for the Union territories with regard to any subject. With regard to
Union territories there is no distribution of legislative power. Article 246(4) enacts that "Parliament has power to
make laws with respect to any matter for any part of the territory of India not included in a State
notwithstanding that such matter is a matter enumerated in the State List. In R.K. Sen v. Union it was pointed
out that having regard to Art. 367, the definition of "State" in s. 3(58) of the General Clauses Act, 1897 applies
for the interpretation of the Constitution unless there is anything repugnant in the subject or context. …. this
inclusive definition is repugnant to the subject and context of Art. 246. There, the expression "State"
means the State specified in the First Schedule. There is a distribution of legislative power between Parliament
and the legislatures of the States. … . There is no distribution of legislative power with respect to Union
territories. That is why Parliament is given power by Art. 246(4) to legislate even with respect to
matters enumerated in the State List. If the inclusive definition of "State" in s. 3(58) of the General Clauses
Act were to apply to Art. 246(4), Parliament would have no power to legislate for the Union territories with
respect to matters enumerated in the State List and until a legislature empowered to legislate on those matters
is created under Art. 239A for the Union territories, there would be no legislature competent to legislate on
those matters; …... Such a construction is repugnant to the subject and context of Art. 246. It follows that in
view of Art. 246(4), Parliament has plenary powers to make laws for Union territories on all matters. ….
The President in the exercise of his powers under Art. 240 can make regulations which have the same
force and effect as an Act of Parliament which applies to that territory. … This general power of the
President to make regulations extends to all matters on which Parliament can legislate.
It also follows that the Parliament has the power to issue executive directions to the Administrator of the Union
territory, which the latter is bound to carry out, so long as they are not inconsistent with the Regulations issued
by the President of India under Article 240, which have the overriding legislative effect under Article 240(2).
7. GST – in Union territories without Legislature
Supplies within such Union territory
Central GST will apply to whole of India and hence, it would be applicable to all Union territories, with or
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3. without Legislature. To replicate the law similar to State GST to Union territories without Legislature, the
Parliament has the powers under Article 246(4) to make such laws. Alternatively, the President may use his
general powers to formulate such laws.
Hence, law same as / similar to State GST can be formulated for Union territory without Legislature, by the
Parliament.
Supplies from/to such Union territory from/to outside such territory
GST (i.e. Integrated GST) on supplies in the course of inter-State trade or commerce shall be levied and
collected by the Government of India[12]. The definition of State (to include a Union territory with Legislature)
is extended for the Integrated GST (IGST) purposes too.
However, the Parliament while making the IGST law, using the powers under Article 269A of the Constitution of
India, could simultaneously also use the powers granted under Article 246(4) of the Constitution of India to
make such IGST law and define the ‘State’ to mean as specified in the General Clauses Act. By doing so, the
Union territories without Legislature would be part of IGST law.
Under the Model GST law[13], the term, ‘appropriate State’ is defined in the Model IGST law – wherein, the
‘State’ include Union territory with Legislature. ‘State’ is not defined in Model CGST / SGST or in Model IGST
law. The term ‘State’ should be defined in Model IGST law separately to mean as defined in the General
Clauses Act, 1897; in which event, the supplies from/to Union territories without Legislature would be
considered to determine supplies in the course of inter-State trade or commerce.
8. Concluding remarks
Large numbers of organisations have business in Union territory of Dadra & Nagar Haveli and Daman & Diu.
To bring parity on applicability of GST across the country and to have destination based consumption tax on
supply of goods / services, GST should apply equally in Union territories without Legislature, as it would apply
in rest of the country. Judicious use of powers granted to the Parliament of India, under Article 246(4) of the
Constitution of India, will enable the same.
[1] As amended by the Constitution (One Hundred and First Amendment) Act, 2016 (‘CAA, 2016’)
[2] Article 246A of Constitution of India, as per inserted by Section 2 of the CAA, 2016
[3] Clause (26B) of Article 366 of Constitution of India, as per inserted by Section 14 of the CAA, 2016
[4] Clause (12A) of Article 366 of Constitution of India, as per inserted by Section 14 of the CAA, 2016
[5] States and Union territories are specified in First Schedule to the Constitution of India
[6] Union territory is defined in Article 366(30) of the Constitution of India to mean any Union territory specified
in the First Schedule to the Constitution of India and to include any other territory 106comprised within the
territory of India but not specified in that Schedule
[7] Article 246 of the Constitution of India read with Seventh Schedule to the Constitution
[8] Article 248 of the Constitution of India
[9] AIR 1968 SC 637
[10] AIR 1970 SC 1126
[11] Article 240(1) of the Constitution of India
[12] Article 269A of Constitution of India, as per inserted by Section 9 of the CAA, 2016
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4. [13] Model GST Law as released by Empowered Committee of State Finance Ministers in June 2016
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