Articles 286 and 287 of the Constitution of India
Article 286 limits State taxation of certain supplies, particularly supplies outside the State and supplies in the course of import into or export out of India. Article 287 protects specified consumption and sale of electricity from State taxation, subject to Parliament providing otherwise.
Article 286 - Restrictions as to imposition of tax on the sale or purchase of goods
The marginal heading of Article 286 continues to refer to restrictions concerning tax on the sale or purchase of goods. Its operative text, however, was amended for the GST framework and now regulates State laws imposing tax on specified supplies of goods or services or both.
Article 286(1): No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or of services or both, where such supply takes place:
(a) outside the State; or
(b) in the course of the import of the goods or services or both into, or export of the goods or services or both out of, the territory of India.
Article 286(2): Parliament may by law formulate principles for determining when a supply of goods or of services or both takes place in any of the ways mentioned in clause (1).
The wording above reflects the current constitutional text after the Constitution (One Hundred and First Amendment) Act, 2016. For authoritative wording and amendment footnotes, use the official Constitution published by the Legislative Department.
Meaning and effect of Article 286
Article 286 is a constitutional restriction on the taxing power of the States. In simple terms, a State law cannot impose tax on a supply that constitutionally falls outside that State or occurs in the course of import into, or export out of, India. Parliament is empowered to formulate the principles used to determine when a supply falls within these categories.
The 2016 constitutional amendment aligned Article 286 with the GST system by replacing the earlier focus on sale or purchase of goods with the wider concept of supply of goods or services or both. The former clause (3), which dealt with specified restrictions on State sales-tax laws, was omitted.
Article 286 should therefore be read with the constitutional GST framework, including Article 246A, Article 269A and Article 279A, as applicable, and with the relevant GST legislation. The Central Sales Tax Act, 1956 remains relevant in the fields in which that enactment continues to operate.
Article 287 - Exemption from taxes on electricity
Article 287 restricts State taxation of electricity used for specified Union Government and railway purposes. The protection applies unless Parliament provides otherwise by law.
Subject to Parliament providing otherwise, a State law cannot impose or authorise a tax on the consumption or sale of electricity where the electricity 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 a railway by the Government of India or a railway company operating that railway, or sold to the Government or such railway company for that purpose.
Where a law imposes or authorises tax on the sale of electricity, Article 287 also requires the protected sale price to be reduced by the amount of the tax when compared with the price charged to other consumers of a substantial quantity of electricity.
Meaning and effect of Article 287
The purpose of Article 287 is to prevent State electricity taxation from burdening the Union Government and specified railway operations in the circumstances stated in the Article. It is not a general exemption for every consumer or every use of electricity. The constitutional protection is tied to the identity of the consumer and the specified governmental or railway use.
Electricity taxation also appears separately in Entry 53 of List II of the Seventh Schedule, which concerns taxes on the consumption or sale of electricity. Article 287 operates as a constitutional limitation on that State taxing field in the cases covered by the Article.