The Constitution (Sixth Amendment) Act, 1956

The Lok Sabha bill was debated on 7 May 1956 and, on 9 May, the House moved and adopted a motion to refer the bill to the Joint Committee of the Houses of Parliament. This resolution was accepted by the Rajya Sabha on 16 May 1956. The Joint Committee submitted its report to Lok Sabha on 23 May 1956, proposing that the Bill be adopted, as no changes were required. The bill was then accepted and approved on 29 May 1956 by Lok Sabha. A systematic amendment, introduced by then Minister of Finance Mr. C.D. Deshmukh, to substitute the brackets and words "(Tenth Amendment)" in clause 1 with the brackets and words "(Sixth Amendment)," was also implemented. In its original form, Clause 2 (seeking to introduce a new entry 92A into the Union List of the Seventh Schedule), clause 3 (amending Article 269) and clause 4 (amending Article 286) were adopted. The resolution, approved by Lok Sabha, was taken into account and passed on 31 May 1956 by Rajya Sabha. The bill was endorsed by then President Dr. Rajendra Prasad on 11 September 1956 after ratification by the States. This was published and came into effect on the same day in The Gazette of India.

This bill was passed in compliance with the requirements of Article 368 of the Constitution and, before the Bill containing a provision for that amendment is submitted for consideration to the President, it was authorized by more than half of the Member States listed in Sections A and B of the First Schedule in the form of resolutions adopted by those legislatures in that regard. The Sixth Amendment to the Constitution to India, formally recognized as the Constitution (Sixth Amendment) Act, 1956, imposed taxes on inter-state sales and transactions of goods other than newspapers within the sole legislative and administrative control of the State, and placed taxes on inter-state sales and acquisitions of goods other than newspapers. While such taxes may be assessed and raised in compliance with the Act of Parliament, they may not be part of the  Consolidated Fund of India, but would incur to the States themselves in keeping with the rules of distribution that may be laid down by statute by the Parliament.

The latest entry 92A was included in the Union List in Section 2 of the sixth amendment. It also replaced entry 54 on the State List that previously said, "Taxes on Sales or purchase of products other than newspapers" and made Entry 54 on the State Lists 'subject to the requirements' on this latest entry and taxes on the inter-state sales and procurement of products other than newspapers within the exclusive legislative and executive authority of the State. 

Section 3(a) of the Act inserted a new subclause (g) into the system referenced by Article 269, adding taxation on inter-state transactions and acquisitions of products other than newspapers. Though such taxes would also be assessed and collected according to Act of Parliament, they would not be included in the Consolidated Fund of India, but would be collected by the States in compliance with such distribution principles as may be specified by statute of the Parliament. Article 269, section 3(b), provided a new clause (3). The new clause empowers the Parliament explicitly to develop the principles to determine when goods will be sold or purchased in the course of trade or trade between states.

Section 4 failed to clarify the requirements in clause (1), and re-enacted clauses (2) and (3) of the amended articles. The amendment of Clause (2) empowers the Parliament for the creation, during the purchase or export of products from or to the territories of India, of rules for deciding the position in which a selling or procurement of goods takes place in the country. Under the amended Article 286 (3), Parliament shall have authority, by statute, to designate the goods of specific value to trade or export between States and shall, even in respect of a sales tax scheme, determine the limitations and requirements which will be subject to State legislation (whether or not rendered before or after Parliamentary Laws) 

Proposal and enactment

In May 1956, the Lok Sabha passed the bill for a Constitution (Sixth amendment) Act, 1956 (Bill no. 35 of 1956). This was introduced by M.C. Shah the then Minister of Revenue and civil Expenditure, it attempted to modify Articles 269, 286 and the Seventh Schedule to the Constitution, in order to abolish such irregularities in the intergovernmental taxation on sales and purchases. The purpose of the Bill was to enact the Commission's recommendations on the modification of the constitutional rules on sales tax.  In clause 2, it was proposed to introduce a new Entry 92A to the Union List placing taxes on inter-state transactions and acquisitions within the exclusive legislative and executive powers of the Union, and to render Entry 54 of the State List immune to the requirements of this new entry. In paragraph 3, the Bill sought to apply certain taxes to the list provided for in Article 269(1), and that, even if they did, they would be subject to the rules of this new entry. A further clause was introduced in Article 269 which specifically empowers Parliament to lay down rules of law for deciding when the selling or procurement of products takes place in the form of inter-State exchange or commerce. 

This was suggested in clause 4 that Section 286(1) of the Explanation would be excluded, which had given rise to a great deal of legal uncertainty and operational difficulties. In consideration of the centralization of the national sales tax introduced in paragraph 2 of this Legislation, Clause 286(2) will cease to be relevant in its present nature. Alternatively, it was suggested to introduce a clause allowing Parliament to lay down rules for deciding, in the case of a selling or procurement of products outside the Union, the entry of products into the territory of India or the export of goods outside the territory of India. It was also agreed to amend Article 286(3) with a new provision on the lines suggested by the Taxation Enquiry Committee. Under this amended provision, Parliament will have the authority, by statute, to assign commodities of specific value to inter-State commerce or exchange and also to define the limitations and conditions under which every State legislation (whether rendered before or after statutory rule) should be subject in relation to the scheme of levies, prices and other instances of tax on the selling or purchasing of these products.