A new entry, 'Taxes on services', was added to the Union List, and a new Article 268A on service tax was inserted, by the:

The 88th Constitutional Amendment Act, 2003, added a new entry (Entry 92C, "Taxes on services") to the Union List in the Seventh Schedule, and inserted Article 268A, which provided that service tax would be levied by the Union and collected and appropriated by the Union and the States.

Background of service tax:

• Service tax was first introduced in India in 1994, on the recommendation of the Raja Chelliah Committee on tax reforms.
• It was initially levied on only three services: telephone services, non-life insurance, and stock broking.
• Since the Constitution did not specifically mention services, the Centre levied service tax under its residuary powers.
• The growth of the services sector, which became the largest part of the Indian economy, made it important to give the tax a clear constitutional basis.

What the 88th Amendment did:

• It gave the Union the specific power to levy taxes on services.
• It provided for the sharing of the proceeds between the Union and the States, as decided by Parliament.
• The new Article 268A, however, was never brought into force, and the Centre continued to levy service tax under the existing provisions.

Service tax and GST:

• With the introduction of the Goods and Services Tax (GST) on 1 July 2017, service tax was subsumed in GST.
• The 101st Amendment (2016), which introduced GST, omitted Article 268A and Entry 92C.

Distribution of taxes between the Union and the States:

The Constitution lists the taxes that can be levied by the Union and by the States, and lays down how the proceeds of certain taxes are shared between them, on the recommendations of the Finance Commission.

Why not the other options?

• ✗The 80th Amendment changed the scheme of tax sharing; the 92nd Amendment added four languages to the Eighth Schedule; the 101st Amendment introduced GST.