Article 245

India is a federal union where law-making power is shared between the Centre and the States. Article 245 sets the basic territorial boundary of that power: Parliament for the whole country, States for their own territory. Clause (2) was added because, in a globalizing world, activities happening abroad (like a company's foreign branch, an offshore financial deal, or a crime with cross-border links) can seriously affect India. The framers wanted to make clear that Parliament isn't powerless just because the trigger or effect happens outside Indian soil.

In GVK Industries Ltd. v. Income Tax Officer (2011), the Supreme Court held that while Parliament can validly make laws with extra-territorial operation under Article 245(2), such a law must have a real and expedient nexus with India — it cannot be purely extraterritorial with no connection to India's interests. Earlier cases like State of Bombay v. RMD Chamarbaugwala and the Bengal Immunity case explored how far State laws could reach beyond state borders, generally holding that States' powers are more strictly territorial than Parliament's, and any extraterritorial effect of a State law must still have a sufficient territorial nexus to that state.

• Myth: Clause (2) means Parliament can make laws about absolutely anything happening anywhere in the world, with no limits.
  Fact: Courts, notably in GVK Industries v. ITO (2011), have clarified that such laws must still have a real connection or nexus to India's interests — they can't be totally disconnected from India.
• Myth: State legislatures have the same power as Parliament to make laws with effects outside their state.
  Fact: Article 245(1) confines States to their own territory; only Parliament has the express constitutional cover under clause (2) for extra-territorial laws, though courts have allowed States some laws with incidental extraterritorial effect if there's a sufficient territorial nexus.