Article 288 of CoI : Article 288: Exemption from taxation by States in respect of water or electricity in certain cases.

Explanation using Example

Example 1:

Scenario: The State of Maharashtra wants to impose a tax on electricity generated by a hydroelectric power plant located on the Godavari River, which flows through multiple states.

Application of Article 288:

1. Clause (1): Since the Godavari River is an inter-State river, any hydroelectric power plant on it would be regulated by a law made by Parliament. Therefore, Maharashtra cannot impose a tax on the electricity generated by this plant unless the President of India provides an order allowing it.
2. Clause (2): If Maharashtra still wants to impose the tax, the State Legislature can pass a law to that effect. However, this law will not be effective until it is reserved for the President's consideration and receives his assent. Additionally, if the law includes provisions for setting tax rates or other details through rules or orders, the President's prior consent is required for making those rules or orders.

Example 2:

Scenario: The State of Karnataka has a law in place from before the commencement of the Constitution that imposes a tax on water distributed by a state-run water authority.

Application of Article 288:

1. Clause (1): The existing law of Karnataka that imposes a tax on water distributed by a state-run authority would continue to be in force unless the President issues an order stating otherwise. This means Karnataka can continue to collect this tax without any new legislation.
2. Explanation: The term "law of a State in force" includes laws made before the Constitution came into effect, even if they were not operational in certain areas at that time. Therefore, the pre-existing law in Karnataka is valid under this clause.
3. Clause (2): If Karnataka wants to amend this law or impose a new tax on water distribution, the State Legislature can pass a new law. However, this new law will only be effective after it is reserved for the President's consideration and receives his assent. Any rules or orders made under this new law will also require the President's prior consent.

Example 3:

Scenario: The State of Tamil Nadu wants to impose a tax on electricity consumed by industries located along the Cauvery River, which is an inter-State river.

Application of Article 288:

1. Clause (1): Since the Cauvery River is an inter-State river, any electricity consumed by industries along this river would be regulated by a law made by Parliament. Therefore, Tamil Nadu cannot impose a tax on this electricity unless the President of India provides an order allowing it.
2. Clause (2): If Tamil Nadu still wants to impose the tax, the State Legislature can pass a law to that effect. However, this law will not be effective until it is reserved for the President's consideration and receives his assent. Additionally, if the law includes provisions for setting tax rates or other details through rules or orders, the President's prior consent is required for making those rules or orders.