Part XII: Finance, Property, Contracts and Suits

Article 288: Exemption from State Taxation on Water or Electricity

Original Article:

No law of a State in force immediately before the commencement of this Constitution shall impose, or authorize the imposition of, a tax in respect of water or electricity stored, generated, consumed, distributed, or sold by an authority established by Parliament for regulating or developing any inter-state river or river-valley.

However, a State Legislature may impose such a tax with the prior consent of the President, ensuring national oversight in inter-state resource management.

Explanations:

Article 288 prevents state taxation on water and electricity involved in inter-state projects, ensuring economic cooperation and efficient resource utilization. The article mandates Presidential consent for any state legislation proposing such taxes, preserving federal balance and inter-state harmony.

Key Provisions:

Clause 1: Prohibition of State Taxes

This clause ensures that no state law imposes taxes on water or electricity related to inter-state projects managed by authorities established by Parliament.

• Applies to projects like dams, reservoirs, and power stations serving multiple states.
• Promotes centralized management of critical resources.

Clause 2: Conditional Authority for State Taxation

States can propose taxes on such resources, but these laws require Presidential assent to ensure alignment with national policies.

• Ensures equitable resource allocation among states.
• Provides a check against potential exploitation or revenue conflicts.

Real-Life Examples:

Projects like the Bhakra-Nangal Dam, serving Punjab, Haryana, and Rajasthan, are exempt from state taxes on electricity and water. This exemption facilitates cost-effective resource distribution and inter-state cooperation.

Amendments:

Article 288 has not undergone significant amendments, retaining its original intent to regulate inter-state resource taxation.

Historical Significance:

By safeguarding inter-state resources from state taxation, Article 288 reflects the framers' vision of a unified yet federal India, ensuring equitable resource use and avoiding inter-state disputes.

Debates and Deliberations:

During the Constituent Assembly debates, Dr. B.R. Ambedkar highlighted the need for central oversight in inter-state projects to avoid conflicts and ensure efficiency. Members discussed the balance between state autonomy and national interest.

• Shri H.V. Kamath emphasized the importance of resource-sharing for national development.
• Shri K.T. Shah raised concerns about potential overreach by the Union government but acknowledged the need for federal oversight in critical projects.

References:

• Constitution of India: Comprehensive details on Article 288.
• Inter-State Water Disputes Act: Related legislation addressing inter-state resource management.
• Constituent Assembly Debates: Discussions on the economic implications of Article 288.