Article 288 of Indian Constitution: Exemption from Taxation by States

Article 288 of Indian Constitution exempts water and electricity from state taxation in specific cases. It prohibits states from taxing these resources when stored, generated, consumed, distributed, or sold by designated authorities. This exemption applies to entities established by existing laws or Parliament’s laws for inter-state river regulation. Any state law imposing such taxes requires presidential assent and must be reserved for the President’s consideration, including consent for tax rate regulations.  Explore other important Constitutional Articles.

Article 288 of Indian Constitution

Exemption from taxation by States in respect of water or electricity in certain cases

1. Save in so far as the President may by order otherwise provide, no law of a State in force immediately before the commencement of this Constitution shall impose, or authorise the imposition of, a tax in respect of any water or electricity stored, generated, consumed, distributed or sold by any authority established by any existing law or any law made by Parliament for regulating or developing any inter-State river or river-valley.

📚 Exclusive Free Judiciary Notes For Law Aspirants

Subjects	PDF Link
Download the Free Bharatiya Nyaya Sanhita PDF Created by legal experts	Download Link
Grab the Free Law of Contract PDF used by Judiciary Aspirants	Download Link
Get your hands on the most trusted Free Law of Torts PDF	Download Link
Crack concepts with this Free Jurisprudence PDF crafted by top mentors	Download Link

Explanation--The expression "law of a State in force" in this clause shall include a law of a Stale passed or made before the commencement of this Constitution and not previously repealed, notwithstanding that it or parts of it may not be then in operation either at all or in particular areas.

• The Legislature of a State may by law impose, or authorise the imposition of, any such tax as is mentioned in clause (1), but no such law shall have any effect unless it has, after having been reserved for the consideration of the President received his assent; and if any such law provides for the fixation of the rates and other incidents of such tax by means of rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained to the making of any such rule or order.

Note: "The information is referred from the official website of the Indian Code and is for reference only. Original laws and orders remain untouched.

Download Article 288 of Indian Constitution Free PDF

Under Article 288 of the Indian Constitution water and electricity are capped under state taxation and require Presidential consent—for some deemed non neutral state tax laws. The important provisions are given below:

• Exemption from State Taxes – Waters and electricity used by the Government of India, or for railway operations, are excluded from state taxation procedures unless the President issues an order otherwise.
• Reimbursement Clause – If a state statute imposes such a tax, it is required to provide reimbursement to the central government or the railway companies.
• Presidential Authority – The President is allowed to permit the retention of previously imposed taxation on water and electricity that were custodially imposed before the Constitution’s commencement.
• Operational Efficiency – The exemption eliminates certain expenditures for the central government and the railways, maintaining operational usage.
• Support for Essential Services – By exempting water and electricity used in critical government and railway operations, the article safeguards essential public services.

Article 288 of Indian Constitution Significance

Article 288 of Indian Constitution under Part XII which plays a key role in the regulation of state taxation of water and electricity. It also includes:.

• Protection of Critical Services: The water and electricity which run the central government and railways is exempted from tax which in turn lessens the financial burden on primary infrastructure.
• Presidential Supervision: In Article 288 of Indian Constitution states that the President's role is to give assent to any state law that imposes tax on these resources which in turn maintains a balance between state rights and national issues.
• Support for Inter State Projects: We have put in place a structure which protects inter-state river and electricity projects from state tax which in turn promotes the smooth development and management.
• Tax Policy Flexibility: President may allow for the continuation of certain taxes which is a plus where it is required.
• Operational Effectiveness: Tax reduction for the government and railway companies which in turn improves the efficiency of public services.

Article 288 of Indian Constitution Landmark Cases

Article 288 of the Indian Constitution has been pivotal in cases addressing state taxation on electricity and water, requiring presidential assent for such laws.

Surya Alloy Industries Ltd. v. State of West Bengal & Others (2023)

The Calcutta High Court, in the case of Surya Alloy Industries Ltd. v. State of West Bengal & Others (2023) examined whether the West Bengal Electricity Duty Act, 1935 complied with Article 288 of the Indian Constitution. The petitioners argued that the Act lacked presidential assent which is required for taxation on electricity supplied by inter-state river valley authorities like Damodar Valley Corporation (DVC). The court analyzed the legislative competence of the state in imposing such taxes and whether it amounted to taxation on inter-state electricity sales.

Damodar Valley Corporation v. State of Bihar & Others (1976)

The Supreme Court of India in the case of Damodar Valley Corporation v. State of Bihar & Others (1976) examined whether the Bihar Electricity Duty Act, 1948 could impose taxes on electricity generated by the Damodar Valley Corporation (DVC), an entity established for inter-state river regulation. The court ruled that Article 288 of the Indian Constitution exempts such entities from state taxation unless presidential assent is obtained. The judgment reinforced the constitutional protection for inter-state electricity projects, ensuring that states cannot unilaterally impose taxes on them.

Suryachakra Spinning Mills (P) Ltd. v. State of Tamil Nadu (2006)

The Madras High Court in the case of Suryachakra Spinning Mills (P) Ltd. v. State of Tamil Nadu (2006) examined the issue of sales tax deferral for the petitioner industry. The petitioner sought an extension of the deferral period from five years to nine years, as per government policies. The court directed the state authorities to reconsider the petitioner’s request and dispose of it in accordance with the law.

Conclusion

Article 288 of Indian Constitution plays a crucial role in regulating state taxation on water and electricity. It ensures that states cannot impose taxes on these resources when managed by specific authorities unless presidential assent is obtained. This provision safeguards inter-state projects, supports essential public services and maintains a balance between state autonomy and national interests. By requiring presidential oversight Article 288 prevents arbitrary taxation, ensuring smooth operations for government and railway infrastructure.