Sales taxes are most important revenue for the state sin India. While the taxes vary in their design, they are generally levied in the first point of sale within the State.
Hamilton in his federalist papers stated that Multileveled government permits various functions to be assumed by different levels, potentially improving efficiency since different activities have different optimal scales and hence in India with respect to Sales Tax Federalism, The Constitutional amendment in 1956, gave the States power to impose sales tax the Central Sales Tax Act, 1956,enacted by the Sixth Constitutional Amendment which introduced Entry 92A in List I of the Seventh Schedule authorizing Parliament to levy tax on the sale or purchase of goods (other than newspapers) in the course of inter-State trade.
The revenue from this tax was assigned to the States by amending Article 269 of the Constitution. Thus, sale within the State (Intra-State sale) is within the authority of State Government, while sale outside State (Inter-State sale) is within the authority of Central Government. Accordingly, the Central Sales Tax (CST) is levied on sale or purchase of goods in the course of inter-State trade and commerce. The power to levy the CST and revenue from this tax is, however, assigned to the State occasioning the movement of goods from one State to another (i.e., the exporting State)
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