Actual Article
Article 287: Exemption from taxes on electricity
Save in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorize 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 the Government of India or any such railway company for consumption in the construction, maintenance, or operation of any railway,
and any such law imposing, or authorizing the imposition of, a tax on the consumption or sale of electricity shall secure that the tax payable on the sale of electricity to the Government of India for consumption by that Government, or to any such railway company for consumption in the construction, maintenance, or operation of any railway, shall be reimbursed to that Government or the railway company.
UPSC Notes for Article 287
Explanation:
- Exemption from State Taxes: Article 287 exempts electricity consumed by or sold to the Government of India, as well as electricity used for the construction, maintenance, or operation of railways, from State taxes unless Parliament provides otherwise by law.
- Reimbursement Clause: If any State law imposes a tax on such electricity, it must ensure that the tax paid is reimbursed to the Government of India or the railway company.
Key Points:
- Promoting Government Efficiency: The exemption is intended to reduce the financial burden on the central government and railways, ensuring more efficient operation and maintenance.
- Parliamentary Authority: Parliament retains the authority to legislate otherwise, providing flexibility in tax policies related to electricity.
- Support for Railways: By exempting electricity used in railways from State taxes, the article supports the development and operation of a critical national infrastructure.
Important Cases and Commissions Related to Article 287
Cases:
- No specific landmark cases directly interpreting Article 287, as it primarily deals with procedural aspects of taxation on electricity.
Commissions:
- Finance Commission: Reviews and makes recommendations on financial policies, including tax exemptions under Article 287.
- Electricity Regulatory Commissions: Oversee the regulation of electricity tariffs and policies, including the implications of tax exemptions for the electricity sector.
Important Reports Related to Article 287:
- Finance Commission Reports: Analyze the impact of tax exemptions on electricity consumption by the government and railways.
- Reports by Electricity Regulatory Commissions: Discuss the financial implications of tax policies on electricity and recommend measures to optimize electricity consumption and taxation.
Previous Year Prelims Questions Related to Article 287
- (UPSC Prelims 2016) What does Article 287 of the Indian Constitution exempt from State taxes?
- A. Consumption of water by the government
- B. Sale and consumption of electricity by the Government of India and for railways
- C. Sale of agricultural produce
- D. Purchase of machinery by industries Correct Answer: B. Sale and consumption of electricity by the Government of India and for railways
- (UPSC Prelims 2018) Who has the authority to alter the tax exemptions provided under Article 287?
- A. The President
- B. The Prime Minister
- C. The Parliament
- D. The Supreme Court Correct Answer: C. The Parliament
Previous Year Mains Questions Related to Article 287
- Mains 2016: “Discuss the significance of Article 287 in promoting the efficient operation of government functions and railways. How does this exemption impact the financial policies of State governments?”
- Mains 2019: “Evaluate the role of Parliament in regulating tax exemptions on electricity as provided under Article 287. What are the potential benefits and challenges associated with these exemptions?”
Additional Insights:
- Enhancing Operational Efficiency: Article 287 plays a crucial role in enhancing the operational efficiency of government functions and railways by reducing the financial burden of electricity taxes.
- Balancing State and Central Interests: The exemption from State taxes balances the financial interests of both State and central governments, ensuring that essential services like railways are not hindered by additional tax burdens.
Understanding Article 287 is crucial for UPSC aspirants as it provides insights into the mechanisms for exempting electricity from State taxes, emphasizing the importance of operational efficiency and financial autonomy for government functions and railways. This knowledge is essential for both preliminary and main examinations, offering a comprehensive understanding of the financial provisions and their impact on governance within the Indian Constitution.