This is a specific category under India's constitutional scheme of financial relations between the Union and the States, covered under Article 268 of the Constitution.
The Basic Rule
Article 268 deals with duties that are:
Levied by the Union (meaning the Union government decides the rate and imposes the tax)
Collected by the States (meaning state machinery does the actual collection work)
Appropriated entirely by the States (meaning the money does NOT go into the Consolidated Fund of India — it goes straight to the states where it's collected)
This is different from "shareable taxes" (like income tax) where the Union collects and then shares proceeds with states based on Finance Commission recommendations. Here, the states keep 100% of what they collect.
What Falls Under This Category
1. Stamp duties
On bills of exchange, cheques, promissory notes, insurance policies, share transfers, and similar instruments
The rates are fixed by Parliament (Union law), but each state government collects the duty within its territory and keeps the proceeds
2. Excise duties on medicinal and toilet preparations
These contain alcohol, opium, or narcotics
Again, Parliament fixes the duty, but states collect and retain it
Important Distinction You Should Note
Don't confuse this with two other categories, because exam questions and general knowledge sources often blur these:
Category | Levied by | Collected by | Money goes to |
|---|---|---|---|
Article 268 duties | Union | States | States (100%) |
Article 269 taxes | Union | Union | States (assigned, not shared) |
Article 270 taxes (income tax etc.) | Union | Union | Shared pool (Union + States, via Finance Commission formula) |
Article 269 covers taxes like tax on inter-state sale/purchase of goods and inter-state consignment of goods. Here the Union both levies AND collects, but the entire proceeds are assigned to the states (not retained by the Union at all).
Article 268-A, which dealt with service tax, was omitted after GST was introduced in 2017 — service tax got subsumed into GST.
A Practical Point Worth Flagging
Since GST implementation, this whole architecture is somewhat less central in practice because most indirect taxes now flow through the GST framework (CGST, SGST, IGST) with its own revenue-sharing mechanism via the GST Council. Article 268 still exists on paper and stamp duties still work this way, but if you're studying this for current affairs or policy relevance rather than a static GK/exam context, you should know the GST regime has overtaken much of this in practical importance.
Quick Summary for Recall
If someone asks "which taxes does the Union levy but states collect and keep fully" — the direct textbook answer is:
Stamp duties (on specified instruments)
Excise duty on medicinal and toilet preparations containing alcohol/narcotics
Both governed under Article 268 of the Constitution.
One Thing to Check If This Is Exam Prep
If you're preparing this for a competitive exam (UPSC, state PSC, etc.), verify against the current syllabus year — constitutional amendments and GST-related changes have shifted some classifications over the past decade. If you tell me which exam or context this is for, I can point you to what's actually being tested versus what's now more historical/theoretical.