Restrictions on State Taxation of Sale or Purchase of Goods
Official heading: “Restrictions as to imposition of tax on the sale or purchase of goods”
- Source edition
- The Constitution of India (as on 1 May 2026)
- Source locator
- Part XII, Article 286, printed pages 168–169
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1. In One Sentence
Prohibits States from imposing tax on the sale or purchase of goods taking place outside the State, in the course of import or export, or under inter-State GST.
2. What It Means in Everyday Language
Article 286 places vital constitutional restrictions on the taxing power of State Legislatures to prevent economic balkanization and double taxation across India.
Clause (1) prohibits any State from imposing a tax on the supply of goods or services: (a) where the supply takes place outside the State; or (b) where the supply takes place in the course of the import of goods or services into India, or export of goods or services out of India.
Clause (2) authorizes Parliament by law to formulate principles for determining when a supply of goods or services takes place outside a State or in the course of import or export.
Following the 101st Amendment in 2016, Article 286 was harmonized with the GST framework, ensuring that States cannot levy local sales taxes on transactions subject to inter-State IGST under Article 269A.
3. Practical Illustrative Example
A diamond exporter in Surat ships polished gemstones to Antwerp, Belgium, or an electronics firm imports microchips through Mumbai port.
4. Important Limits, Qualifications & Exceptions
Article 286 preserves an integrated national market and foreign trade corridor.
- Out-of-state prohibition: No State can tax a transaction occurring outside its territorial borders.
- Import-export immunity: Complete constitutional immunity for cross-border international supplies.
- Parliamentary boundary formulation: Parliament establishes the legal criteria defining the situs of inter-state sales.
5. Operative Constitutional Text
6. Sources & Historical Assembly Deliberations
Assembly quotations are withheld until wording, dates, and attribution have been checked against the primary record.
- •Government of India (Legislative Department, Ministry of Law and Justice) • Part XII, Article 286, printed pages 168–169 • Human source-link check pending
Primary PDF accessed and transcribed with AI assistance on 14 October 2026. Formatting and amendment annotation markers are omitted; operative wording is retained. This is not human legal review. Later amendments and commencement notifications have not been comprehensively checked.