State cannot tax hydropower generation: Uttarakhand HC

The Uttarakhand High Court has ruled that the state government lacks authority to levy tax on electricity generation from hydropower projects, saying such powers vest solely with the Centre. Justice Alok Kumar Verma delivered the verdict while hearing special appeals filed by several hydropower companies against the state's tax imposition on Monday. The decision follows a reference to the single bench after a division bench previously expressed differing opinions on the matter. The legal dispute originated from the Uttarakhand Water Tax on Electricity Generation Act, 2012. The state government had imposed a water tax ranging from 2 to 10 paise per unit based on project capacity. Several firms, including Alaknanda Power Project Private Limited, THDC, NHPC, Swati Power Project Private Limited, Bhilangana Hydro Power Project, and Jaiprakash Power Ventures Private Limited, challenged the Act. Acording to the records, the agreements executed after the state's formation required companies to provide 12 per cent of generated electricity to Uttarakhand free of cost. The remaining power was designated for sale to Uttar Pradesh. A single bench had earlier dismissed the petitions, ruling that the legislature held the authority to enact the law. The court then observed that the tax targeted electricity generation rather than water usage. The latest ruling overturned the previous position. The court held that the state government cannot constitutionally tax the ''generation of electricity''.

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