Part XII - Finance & Property • Article

Article 287 Simplified: Exemption from taxes on electricity

Article 287 bans State governments from taxing electricity consumed by the Central Government (Government of India) or the Central Railways, unless Parliament makes a law allowing it. It also ensures that if states tax electricity generally, the electricity sold to the Central Government or Railways must be cheaper by the exact amount of that tax.

Official Text

Save in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the consumption or sale of electricity (whether produced by a Government or other persons) which is— (a) consumed by the Government of India, or sold to the Government of India for consumption by that Government; or (b) consumed in the construction, maintenance or operation of any railway by the Government of India or a railway company operating that railway, or sold to that Government or any such railway company for consumption in the construction, maintenance or operation of any railway, and any such law imposing, or authorising the imposition of, a tax on the sale of electricity shall secure that the price of electricity sold to the Government of India for consumption by that Government, or to any such railway company as aforesaid for consumption in the construction, maintenance or operation of any railway, shall be less by the amount of the tax than the price charged to other consumers of a substantial quantity of electricity.

Simple Meaning

Explain Like Ten

States are not allowed to charge electricity tax on the power used by the central government or the trains (railways). This keeps the cost of running trains lower for everyone.

Student Mode

Article 287 protects the Union government's operations from state utility taxes. It prohibits States from taxing the consumption or sale of electricity when consumed by the Government of India or used for the construction, maintenance, or operation of railways. If a state law levies electricity tax, it must ensure the price charged to the Union or Railways is reduced by the tax amount.

Example

If a State levies an electricity duty of 15% on power consumption, it cannot apply this tax to the electricity used in railway stations, trains, or central government offices within that state. The power utility company must bill the railways at a tax-free rate.

Key Takeaway

States cannot tax electricity consumed by the Central Government or the railways, ensuring federal operations are not taxed by states.

FAQs

Can a State tax electricity used by private railway companies?

No, if they are operating the railway on behalf of the Government of India, the electricity consumed in its operation is exempt.

Can the central government waive this electricity tax exemption?

Yes. The exemption applies 'save in so far as Parliament may by law otherwise provide.' Parliament can pass a law allowing states to tax it.

Quiz

Under Article 287, electricity consumed by which entity is exempt from state taxation?

Answer: The Government of India and Railways

If a state imposes a tax on electricity sale, how must it price electricity sold to the Union?

Answer: It must be priced lower by the tax amount