Lok Sabha Question No. 207 (UNSTARRED), answered on 2023-07-20
Subject: Levies on Power Generation
Ministry: POWER
Asked by: Manickam Tagore B

## GOVERNMENT OF INDIA MINISTRY OF POWER

## LOK SABHA UNSTARRED QUESTION NO.207 ANSWERED ON 20.07.2023

## LEVIES ON POWER GENERATION

207.   SHRI MANICKAM TAGORE B.:

Will the Minister of POWER be pleased to state:

- (a) whether  it  is  a  fact  that  the  Government  has  asked  the  States  to  scrap levies on power generation;
- (b) whether it is also true that the Government has asked the States to collect levies from consumers even when residing in other States;
- (c) whether  the  Government  has  received  any  response  from  the  State Governments in this regard; and
- (d) if so, the details thereof?

## A N S W E R

THE MINISTER OF POWER AND NEW & RENEWABLE ENERGY

(SHRI R.K. SINGH)

(a)  : Yes, Sir. Government of India, vide letter dated 25.04.2023 addressed to the Chief Secretaries of all the State Governments and Union Territories, has advised  that  no  taxes  /  duties  may  be  levied  by  any  State  on  generation  of electricity  and  if  any  taxes  /  duties  have  been  so  levied,  it  may  be  promptly withdrawn. A copy of the letter dated 25.04.2023 is enclosed as Annexure.

- (b)  : No,  Sir.  Government  of  India  has  not  asked  the  States  to  collect levies from consumers even when residing in other States.
- (c) & (d)  :  No, Sir. Government of India has not received any response from the State Governments in this regard.

************

To

## ANNEXURE

## ANNEXURE REFERRED IN REPLY TO PART (a) OF UNSTARRED QUESTION NO.207 ANSWERED IN THE LOK SABHA ON 20.07.2023 **************

File No. 15/27/2023-Hydel-II (MoP) Government of India Ministry of Power

Shram Shakti Bhawan, Rafi Marg, New Delhi, Dated 25 th  April, 2023

## The Chief Secretaries - All the State Governments & UTs

Subject:  Imposition of Water Tax / Cess by various State Government on HEPs reg.

Sir,

It has come to the notice of the Government of India (GoI) that some State Governments  have  imposed  taxes  /  duties  on  generation  of  electricity.  This  is illegal  and  unconstitutional.  Any  tax  /  duty  on  generation  of  electricity,  which encompasses all types of generation viz. Thermal, Hydro, Wind, Solar, Nuclear, etc. is illegal and unconstitutional. The Constitutional provisions are as follows:

- (i) The powers to levy taxes / duties are specifically stated in the VII Schedule. List-II  of  the  VII  Schedule  lists  the  powers  of  levying  of  taxes  /  duties  by  the States in entries - 45 to 63. No taxes / duties which have not been specifically mentioned in this list can be levied by the State Governments under any guise whatsoever - as Residuary powers are with the Central Government.
- (ii) Entry-53  of  List-II  (State  List)  authorizes  the  States  to  put  taxes  on consumption  or  sale  of  electricity  in  its  jurisdiction.  This  does  not  include  the power to impose  any tax or duty on the generation of electricity. This is because electricity generated within the territory of one State may be consumed in other States and no State has the power to levy taxes / duties on residents of other States.
- (iii) Some States have imposed taxes / duties on generation of electricity under the guise  of  levying  a  cess  on  the  use  of  water  for  generating  electricity. However, though the State may call it a water cess, it is actually a tax on the generation  of  electricity  -  the  tax  is  to  be  collected  from  the  consumers  of electricity who may happen to be residents in other State.

(iv) Article -286 of the Constitution explicitly prohibits States from imposing any taxes / duties on supply of goods or services or on both where the supply takes place outside the State.

(v) Articles-287  and  288  prohibit  the  imposition  of  taxes  on  consumption  or sale  of  electricity  consumed  by  the  Central  Government  or  sold  to  the  Central Government for consumption by the Government or its agencies.

(vi) As per Entry-56 of the Union List of the Constitution of India, regulations of issues related to Inter-State Rivers come under the purview of the Centre. Most  of  the  Hydro-Electric  Plants  in  the  States  are  located  /  proposed  to  be developed   on Inter-State Rivers. Any imposition of tax on the non-consumptive use of water of these rivers for electricity generation is in violation of provisions of the Constitution of India.

(vii)   Hydro  Power  Projects  do  not  consume  water  to  produce  electricity. Electricity  is  generated  by  directing  the  flow  of  water  through  a  turbine  which generates   electricity  -  on  the  same  principle  as  electricity  from  wind  projects where wind is utilized to turn the turbine to produce electricity. Therefore, there is no rationale for levy of 'water cess' or "air cess".

(viii)   The levy of water cess is against the provisions of the Constitution. Entry-l7 of List-II, does not authorize the State to levy any tax or duty on water.

2. In  light  of  the  above  constitutional  provisions,  no  taxes  /  duties  may  be levied by any State under any guise on generation of electricity and if any taxes/ duties have been so levied, it may be promptly withdrawn.

This has the approval of the Hon'ble Union Minister of Power and New & Renewable Energy.

Yours sincerely,

-Sd -

(R.P. Pradhan) Director Email: rp.pradhan@nic.in Tel.:011-23717753