Article 269 of CoI : Article 269: Taxes levied and collected by the Union but assigned to the States.

Explanation using Example

Example 1:

Imagine a company named "ABC Electronics" based in Maharashtra sells a large batch of smartphones to a retailer in Karnataka. The sale of these smartphones is considered an inter-State sale because it involves the transfer of goods from one state to another. According to Article 269, the tax on this sale will be levied and collected by the Government of India. However, the revenue generated from this tax will not be kept by the central government. Instead, it will be assigned to the states involved—in this case, Maharashtra and Karnataka—based on principles formulated by Parliament.

Example 2:

Consider a scenario where a textile manufacturer in Gujarat sends a consignment of fabrics to its own warehouse in Tamil Nadu. This consignment is also an inter-State transaction. The tax on this consignment will be levied and collected by the Government of India. However, the net proceeds from this tax will be distributed to the states involved, Gujarat and Tamil Nadu, rather than being part of the Consolidated Fund ...

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