Explanation:

The Constitution (Sixth Amendment) Act, 1956, brought taxes on inter-State sales and purchases of goods other than newspapers within the exclusive legislative and executive power of the Union, and levied taxes on inter-State sales and purchase of goods other than newspapers. 
Amendment of the Seventh Schedule:

In the Seventh Schedule of the Constitution

(a) in the Union List, after entry 92, the following entry shall be inserted, namely:-

• "92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce"; and

(b) in the State List, for entry 54, the following entry shall be substituted, namely:-

• "54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List 1."

Hence option 1st is correct.