Articles 301 to 307 of the Indian Constitution govern interstate trade and commerce. They guarantee freedom of trade across states while allowing Parliament and states to impose reasonable restrictions in the public interest, ensuring national economic integration without discrimination or unjustified barriers. 

The Indian Constitution is not just a political document; it is also an economic blueprint. It envisions India as a single economic entity where trade, commerce, and intercourse flow freely across state lines without artificial barriers. The importance of this vision cannot be overstated in a country as vast and diverse as India, where linguistic, cultural, and geographic differences could easily spill over into economic fragmentation if not carefully managed.

Recognizing these challenges, the framers of the Constitution provided a robust framework to regulate and protect interstate trade and commerce. This framework is primarily housed in Part XIII of the Constitution, which spans Articles 301 to 307. Each provision meticulously balances freedom with regulation, federal authority with state autonomy, and economic unity with local interests.

Historical Background

When India stood on the threshold of independence, it faced a nation not just politically fragmented but also economically disjointed. Unlike the cohesive economic units seen in many European nations, pre-independence India was a complex mosaic of British-administered provinces and over 500 princely states, each with varying degrees of autonomy. While the British directly governed certain regions, the princely states maintained their own systems of administration, revenue collection, and crucially, control over trade and commerce.

In practical terms, this meant that moving goods across regions was a cumbersome and expensive affair. Traders, manufacturers, and ordinary citizens had to navigate an exhausting maze of:

• Internal tariffs: Different regions imposed taxes on goods entering their territories, sometimes even when these goods were merely passing through.
• Transit duties: Goods moving from one princely state to another often had to pay multiple fees, inflating costs significantly.
• Customs barriers: Many states maintained customs posts at their borders, slowing down the movement of goods and services with extensive paperwork and bribes.
• Differing regulations: No uniformity existed in commercial laws, weights and measures, or even basic licensing systems.

The result was a stifled internal market. Producers in one region found it difficult and uneconomical to sell their goods in another. Consumers faced higher prices due to cascading taxes and artificial shortages. Economic inefficiencies abounded. Most critically, this fragmented economy hindered the growth of a pan-Indian commercial class, which could have otherwise acted as a unifying force against colonial rule.

Economic Fragmentation

The British Empire, in many ways, thrived on this fragmentation. By keeping India’s economic units disjointed, the British could play regional rulers against each other, prevent the emergence of a unified political consciousness, and control strategic trade routes for their benefit.

A divided economy mirrored a divided polity, weakening collective bargaining power. India’s political leaders, particularly those in the Indian National Congress, realized that economic unification was as crucial to freedom as political liberation.

Constituent Assembly’s Vision for Economic Unity

Thus, when the Constituent Assembly began its monumental task of drafting the Indian Constitution, it was clear that economic integration had to be a constitutional imperative, not a matter left to the goodwill of future governments.

During the debates, luminaries like Dr. B.R. Ambedkar, Pandit Jawaharlal Nehru, Dr. Rajendra Prasad, and K.T. Shah expressed a deep commitment to creating an economic system where barriers within India would be demolished. Freedom of trade, commerce, and intercourse was seen not just as a matter of economic efficiency but as a pillar of national unity.

As Dr. Ambedkar eloquently argued, it was necessary to guarantee that once political unity was achieved, it would not be undermined by economic provincialism:

“If freedom of trade and commerce within the country is not ensured, political unity will be rendered hollow.”

The Assembly understood that economic freedom among the states would foster:

1. Better resource allocation across regions.
2. Balanced regional development, reducing economic disparities.
3. Growth of a national identity, transcending narrow provincial loyalties.

Without these, the mere political stitching together of territories would remain superficial, vulnerable to fissures along economic lines.

Influence of Foreign Models

The framers also looked outward for guidance. Particularly, they drew inspiration from Section 92 of the Australian Constitution, which guarantees that trade, commerce, and intercourse among the states shall be absolutely free.

Australia’s experience was illuminating. Although it consisted of formerly separate colonies, once it federated in 1901, it constitutionally enshrined economic freedom to prevent disunity. This ensured that interstate commerce thrived, contributing to national stability.

The Indian context, though more complex, resonated strongly with this model. Accordingly, the framers incorporated a set of provisions that, while not copying the Australian framework blindly, adapted its spirit to India’s unique challenges.

They recognized that India’s greater size, diversity, and socio-economic disparities demanded a more nuanced approach — balancing unrestricted freedom with necessary regulatory oversight to protect public interest, maintain law and order, and foster equitable development.

Thus, India’s constitutional approach was not an unqualified mandate of absolute freedom, but rather a framework of qualified freedom carefully monitored through regulatory powers granted to Parliament and, to a limited extent, to the states.

Birth of Part XIII

From these debates and influences emerged Part XIII of the Constitution, containing Articles 301 to 307, which collectively provide:

• A broad guarantee of freedom of trade, commerce, and intercourse across India (Article 301).
• The power for Parliament to impose reasonable restrictions in the public interest (Article 302).
• A strict bar against preferential treatment of any state (Article 303).
• Limited powers to states themselves to regulate trade while maintaining non-discrimination (Article 304).
• Protection of existing laws during the transitional phase post-independence (Article 305).

The architects of the Constitution foresaw that while India needed an economic system free of arbitrary restrictions, it also required safeguards against unregulated chaos or exploitative practices. Hence, they consciously designed a structure that would prevent economic balkanization while preserving a measure of federal flexibility.

The Structure of Part XIII of the Constitution

Part XIII of the Constitution (Articles 301 to 307) specifically deals with Trade, Commerce, and Intercourse within the Territory of India. Here’s a quick roadmap:

Each of these provisions interacts dynamically with the others, ensuring a balance between unrestricted movement and necessary regulatory oversight.

Article 301: Freedom of trade, commerce, and intercourse

The principle of economic unity in India finds its most significant expression in Article 301 of the Constitution. It proclaims a bold vision: a national market without artificial boundaries, enabling free movement of trade, commerce, and intercourse across the length and breadth of India.

Article 301 says,

“Subject to the other provisions of this Part, trade, commerce, and intercourse throughout the territory of India shall be free.”

This simple, unembellished sentence carries within it a powerful commitment: economic freedom across state borders is a vital necessity for ensuring national integration, economic growth, and equality among India’s regions.

However, the words “subject to the other provisions of this Part” are crucial. They create a balance between freedom and reasonable regulation, recognizing that some limitations may be necessary in a complex, diverse federation like India.

Elements of Article 301

#1 Scope

While Article 301 primarily concerns interstate trade and commerce, that is, the movement of goods, services, and people across state boundaries,s its scope is broader. It also extends to intra-state activities if they substantially affect interstate trade and commerce.

This interpretation is necessary to avoid a scenario where states could, under the guise of regulating internal matters, indirectly obstruct national economic flow. Thus, the framers ensured that the spirit of economic integration permeates both across and within states.

• Example: If Maharashtra enacts a law that severely restricts the export of agricultural produce grown within the state, and this indirectly hampers the supply to neighboring Gujarat or Karnataka, such a law could come under the scrutiny of Article 301.

Thus, the article protects both interstate and intrastate economic interests if national flow is involved.

#2 Meaning of “Freedom”

The term “freedom” under Article 301 has been the subject of significant judicial exploration. It does not mean complete anarchy or lack of regulation.

Rather, it means:

• Absence of artificial barriers: Taxes, tolls, licenses, permits, and regulations that are discriminatory or create an unequal burden on interstate trade are prohibited.
• No obstruction or hindrance: Measures that directly or substantially obstruct the free flow of commerce are seen as violations of Article 301.

In essence, the Constitution envisions an economic space where businesses and individuals can move goods and services from one part of India to another without being forced to navigate a maze of regional restrictions.

Freedom is Not Absolute

Despite the broad language of Article 301, its freedom is not unconditional. It is subject to other articles in Part XIII, particularly Articles 302, 303, 304, and 305.

Thus:

• Parliament may impose reasonable restrictions in the public interest (Article 302).
• States may also impose certain taxes and restrictions under specific conditions (Article 304).
• Existing laws that might restrict trade were temporarily saved (Article 305).

This careful structure ensures that while economic unity is preserved, federal flexibility is also maintained, necessary in a diverse country where regional needs can vary dramatically.

Interpretation by the Judiciary

Perhaps the most illuminating aspect of Article 301’s development has been its judicial interpretation, especially through landmark Supreme Court decisions. These cases have given practical meaning to the theoretical guarantees in the Constitution.

Atiabari Tea Co. Ltd. v. State of Assam (1961)

Facts:

• The Assam government imposed a tax on the transport of tea through the state’s roads and rivers.
• Atiabari Tea Co., among others, challenged the tax, arguing that it violated their right to freely trade and transport goods across state lines.

Judgment:

• The Supreme Court struck down the tax, holding it to be directly hampering the free flow of trade, thus violating Article 301.
• The Court distinguished between regulatory measures (which facilitate trade, such as traffic rules, safety inspections, etc.) and restrictive measures (which obstruct trade).

Principles Laid Down:

• Direct and immediate restrictions on trade are unconstitutional unless validated by Articles 302–304.
• Taxes, fees, or licensing requirements that act as a burden on free movement, rather than facilitating or regulating it, are liable to be struck down.

Thus, the judgment emphasized that freedom of trade is the rule, and restrictions are the exception, permitted only under tightly controlled conditions.

Post-Atiabari Evolution

The Supreme Court’s approach evolved further in subsequent cases, recognizing that not all regulations impede trade. Some controls are essential for smooth functioning.

In Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (1962):

The Court held that reasonable regulatory measures, such as road taxes or fees necessary for maintaining infrastructure, do not violate Article 301 if they facilitate trade rather than impede it.

Thus, the judiciary established a golden rule:

Regulation is permitted; restriction is not.

Practical Implications of Article 301

1. Removal of Internal Trade Barriers

Article 301 has been instrumental in ensuring that India functions as a single market. Imagine a situation where every state had its own customs check-post, imposing its own taxes and licensing conditions, the result would have been a fragmented economy, like pre-unification Germany.

Thanks to Article 301:

• Goods can move seamlessly across India.
• Businesses are encouraged to expand beyond regional markets.
• Consumers enjoy greater choice and competitive pricing.

2. Role in Economic Federalism

Article 301 also delicately balances economic centralization and federal autonomy:

• Central supervision: Parliament can oversee and regulate trade restrictions nationally under Article 302.
• State flexibility: States can manage local trade needs under Article 304, provided they act within constitutional parameters.

Thus, the principle of economic unity does not undermine the principle of regional self-governance.

3. GST: Operationalizing Article 301

The Goods and Services Tax (GST), introduced through the 101st Constitutional Amendment, is often hailed as a practical realization of Article 301’s dream.

Before GST:

• Each state had different tax regimes.
• Goods were taxed multiple times while crossing state borders.
• Entry taxes, octroi, and border delays hampered smooth commerce.

GST eliminated these barriers by:

• Introducing “one nation, one tax.”
• Facilitating seamless interstate movement of goods.
• Reducing logistics costs and delivery times.

Thus, GST acts as a contemporary embodiment of the constitutional goal laid down in Article 301.

Article 302: Parliament’s Power to Regulate Trade and Commerce

While Article 301 lays down the broad guarantee of freedom of trade, commerce, and intercourse throughout India, it does not envision an uncontrolled, chaotic free-for-all. Freedom, without some degree of regulation, could be as dangerous as absolute restriction. Recognizing this, the framers of the Constitution introduced Article 302, which gives Parliament the authority to impose reasonable restrictions on this freedom, but crucially, only in the public interest.

The text of Article 302 reads:

“Parliament may by law impose such restrictions on the freedom of trade, commerce, or intercourse between one state and another or within any part of the territory of India as may be required in the public interest.”

Components of Article 302

1. Empowerment of Parliament

The first point to note is that the power under Article 302 is vested solely in Parliament, not in the state legislatures. This centralization ensures uniformity across the country in matters of national economic regulation. If each state had the same unfettered power, it could easily lead to economic balkanization, with each state erecting its own set of trade barriers.

Thus, by conferring this authority only to Parliament, the Constitution safeguards economic unity and coherence across India.

2. Restrictions Must Serve the ‘Public Interest’

The phrase “public interest” acts as both an enabling and limiting factor. It grants Parliament flexibility but also imposes a constitutional discipline. Parliament cannot simply impose restrictions arbitrarily, based on political whims or economic favoritism.

Public interest includes but is not limited to the following broad objectives:

• National Security: For instance, regulating the trade of sensitive materials like arms, ammunition, or critical technologies.
• Public Order: Curtailing the movement of goods that may cause unrest, like explosives or contraband.
• Environmental Protection: Imposing restrictions on the transport of hazardous materials that could harm ecosystems.
• Public Health: Preventing the spread of diseases by restricting trade in contaminated food products, livestock, or other health hazards.
• Economic Stability: Regulating essential commodities like petroleum, food grains, or medicines during inflation or shortages.

Thus, the restrictions must have a genuine, rational connection to an identifiable public purpose. Courts have interpreted “public interest” broadly but not loosely; it must not be a smokescreen for unconstitutional discrimination.

3. Restrictions Should Not Be Arbitrary

Arbitrariness is an anathema to the Indian Constitution. Restrictions must pass the test of reasonableness; they should not be excessive, oppressive, or disproportionate to the objective sought.

Judicial Scrutiny:

If challenged, courts can inquire whether:

• The restriction genuinely serves a public interest objective.
• There is a rational connection between the restriction and the intended goal.
• The measure adopted is the least restrictive means available.

This doctrine ensures that Article 302 cannot be used as a backdoor for imposing disguised protectionism or unfair trade barriers favoring certain regions or industries.

Examples of Restrictions under Article 302

To better understand how Parliament may use its Article 302 powers, let’s look at some practical examples:

1. National Emergency Situations

During a national emergency, whether due to war, external aggression, or armed rebellion, Parliament may regulate or restrict the movement of certain goods critical to defense efforts. For example:

• Restricting the interstate transport of petroleum, explosives, or strategic metals.
• Banning the movement of certain communication devices to prevent misuse.

2. Public Health Crises

During an epidemic or pandemic, Parliament may impose restrictions to curb the spread of disease. For example:

• Prohibiting the interstate movement of livestock during an outbreak of foot-and-mouth disease.
• Banning the distribution of contaminated food products across state lines.

The COVID-19 pandemic offers a contemporary illustration. Although many restrictions were imposed through executive orders and Disaster Management Act regulations, Parliament retains the power to enact laws to control trade and commerce aspects during such crises.

3. Environmental Protection

Certain industries, such as mining or chemical manufacturing, can harm the environment if not properly regulated. Parliament may enact laws that:

• Prohibit the interstate transport of hazardous waste unless certified safe.
• Restrict the trade in wildlife products to protect endangered species.

In such cases, environmental protection directly ties into the broader public interest.

4. Protecting Essential Commodities

Parliament often uses its powers under laws like the Essential Commodities Act, 1955 to regulate trade in items like food grains, sugar, edible oils, and medicines. Restrictions may include:

• Setting limits on stockholding.
• Regulating the interstate supply chain to ensure equitable distribution during times of scarcity.

Here again, the constitutional backing comes not just from general legislation but also from the powers envisaged under Article 302.

How Article 302 Differs from Article 304(b)

It’s important to distinguish Article 302 from Article 304(b):

Thus, Article 302 ensures central oversight and uniformity, while Article 304(b) provides limited power to states for localized regulation.

Constitutional Philosophy Behind Article 302

At a deeper level, Article 302 reflects the Indian Constitution’s commitment to regulated federalism.
The Constitution does not envision either a wholly centralized or a wholly decentralized economic regime. Instead, it adopts a middle path:

• Freedom of trade is the norm (Article 301).
• Restriction is the exception (Article 302), justified only when public interest demands it.

This deliberate design ensures that India can remain economically unified while still responding flexibly to emerging threats and necessities.

In many ways, Article 302 echoes the Constitution’s broader principle found in the Preamble itself, a commitment to securing justice, liberty, equality, and fraternity, not just politically but economically as well.

Article 303: No Discrimination Among States

Article 303 of the Constitution plays a key role in ensuring that no state, whether large or small, rich or poor, is treated differently when it comes to matters of trade and commerce. Without such a provision, economically dominant states might leverage their influence to gain unfair advantages, leading to deep imbalances that could threaten the unity of the nation itself.

Core Principle

Article 303 lays down two important prohibitions:

• Parliament cannot pass any law that gives preference to one state over another in matters of trade, commerce, or intercourse.
• Nor can any law discriminate between states in these matters.

In simple terms, this means the playing field must remain level across the entire country. The legislative power of Parliament and state legislatures is restricted when it comes to treating states differently in commercial and economic activities. Whether it’s Gujarat or Nagaland, Tamil Nadu or Jammu & Kashmir, no state should be favored at the expense of another in terms of economic legislation.

The Important Exception

However, like many constitutional guarantees, the non-discrimination rule under Article 303 is not absolute. The framers of the Constitution wisely anticipated situations where rigid uniformity might cause greater harm than good. Thus, Article 303(2) provides an important exception.

According to this exception, Parliament may, by law, give preference or discriminate between states if it is necessary to deal with a situation of scarcity of goods in any part of India.

This exception acknowledges that extraordinary circumstances, such as natural disasters, famine, or severe economic crises, may demand extraordinary measures. If a particular region is suffering from scarcity, say, a drought in Rajasthan or floods in Assam, Parliament is empowered to pass legislation that gives special treatment to that region in terms of supply and trade to mitigate the crisis.

Thus, while the baseline is strict non-discrimination, flexibility exists when humanitarian or emergency needs demand it.

Rationale Behind the Provision

Why was such a stringent non-discrimination rule included?

The reasons are both economic and political:

• Preventing Regionalism: If economically stronger states were allowed to create barriers favoring themselves, it could lead to feelings of resentment and alienation among less developed states.
• Preserving National Unity: Economic favoritism could easily translate into political demands for greater autonomy or even secession. Equal treatment ensures that all states feel like integral parts of the Union.
• Ensuring a Common Market: A fragmented economic system would hinder the efficiency of production, distribution, and consumption across India, reducing overall national wealth.

In short, Article 303 embodies the spirit of economic federalism with cooperative unity.

Practical Impact of Article 303

The real-world implications of Article 303 are significant:

• Prevention of Economic Dominance: Wealthier and more industrialized states like Maharashtra, Gujarat, or Tamil Nadu cannot legislate in a way that protects their own industries by discriminating against goods from other states.
• Equal Access to Markets: Farmers from Uttar Pradesh, artisans from Manipur, or entrepreneurs from Kerala enjoy the same access to markets across India as anyone else. No special tariffs, taxes, or regulatory barriers can be created by Parliament or any state legislature to their disadvantage.
• Uniform Opportunities for Development: By ensuring that trade and commerce legislation applies equally across states, Article 303 creates a level playing field that is vital for balanced regional development. It encourages investment and entrepreneurship in less developed areas as well.

In effect, Article 303 operates as an economic equalizer, guarding against the monopolization of opportunities by a few privileged states.

Suppose Maharashtra wanted to pass a law giving tax breaks only to industries setting up in Mumbai, while denying similar benefits to industries from other states. Or imagine Parliament passing a law that favored wheat exports only from Punjab while ignoring Bihar’s produce.

Such actions would clearly violate the principle laid down in Article 303 unless justified under the scarcity exception.

By prohibiting such preferential treatment, Article 303 ensures that a business in Bihar stands the same chance as one in Punjab when competing in national or interstate markets.

In broader trade regulation cases like Atiabari Tea Co. v. State of Assam and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, while the primary focus was on Article 301, the Court underlined the principle that economic barriers or discrimination between states must be scrutinized.

In essence, the judiciary treats Article 303 as a foundational safeguard against economic Balkanization.

Why the Exception Must Be Used Carefully

While the exception in Article 303(2) is crucial for dealing with emergencies, it must be applied sparingly and transparently. If Parliament were to routinely invoke “scarcity” as a reason to favor certain states, it would defeat the very principle of equal economic opportunity.

Therefore, when laws are passed under this exception, they must:

• Clearly define the nature of the scarcity,
• Specify the period for which the preferential treatment is valid.
• Be proportional to the need identified,
• Avoid becoming a permanent or unjustified advantage.

Parliament’s discretion is thus limited by constitutional principles of reasonableness, proportionality, and fairness concepts that the judiciary can and does enforce when necessary.

Article 304: State’s Power to Regulate Trade and Commerce

While the Indian Constitution places significant emphasis on national economic unity through provisions like Article 301, it also acknowledges the practical needs and economic autonomy of individual states. Article 304 serves as a vital constitutional tool that empowers state legislatures to enact certain trade-related measures within their territories, but only under clearly defined limits.

The Two Clauses of Article 304

Article 304 contains two distinct sub-clauses, each addressing a different aspect of a state’s power in regulating trade.

Clause (a): Equal Taxation on Imported and Local Goods

Under Article 304(a), a state legislature has the authority to impose taxes on goods imported from other states. However, there is one important caveat: the same tax must also be levied on similar goods produced or manufactured within the state. This ensures non-discrimination and fair competition between local and out-of-state goods.

The logic is straightforward. If a state were allowed to tax goods from other states more heavily than its own, it would essentially create an economic barrier, undermining the constitutional guarantee of free trade across India. Article 304(a) prevents such protectionist tendencies by requiring that taxation policies treat local and non-local goods alike.

For instance, if Tamil Nadu imposes a 10 percent sales tax on cement brought in from Andhra Pradesh, it must also impose the same 10 percent tax on cement manufactured within Tamil Nadu. This provision guards against state-level economic nationalism and helps maintain a level playing field across the Indian market.

Clause (b): Reasonable Restrictions in the Public Interest

Article 304(b) goes a step further by granting states the authority to impose “reasonable restrictions” on trade, commerce, or intercourse within the state, provided such restrictions are in the public interest.

The term “reasonable restrictions” is crucial here. It means that any law passed by a state must not be arbitrary, excessive, or serve narrow local interests. The restrictions must pursue broader societal goals, such as environmental protection, public health, traffic regulation, or maintaining public order, and must pass the test of constitutional reasonableness.

However, this power is not unfettered. Before any law under Article 304(b) is enacted, it must first be introduced in the state legislature with the prior assent of the President of India. This requirement acts as a central oversight mechanism to prevent states from creating disguised trade barriers that might disturb the larger federal equilibrium.

Consider a situation where Maharashtra decides to tackle plastic waste pollution by introducing a “Green Environmental Cess” on all plastic packaging materials sold in the state. This cess would apply equally to goods produced within Maharashtra and to those entering the state from elsewhere. Since this involves a restriction on the trade of a certain category of goods and since it affects interstate commerce, it falls under Article 304(b).

Maharashtra cannot pass this law unilaterally. The bill would first need to be laid before the state legislature with the President’s prior approval, ensuring that the restriction is not anti-competitive or discriminatory and serves a legitimate public interest.

Importance in Federal Balance

Article 304 embodies the delicate balance of India’s quasi-federal structure. It empowers states to make laws tailored to their local socio-economic needs, while ensuring that such powers do not disrupt the broader promise of an integrated national market. The mandatory Presidential assent acts as a constitutional check to ensure harmony between state autonomy and national unity.

Article 305: Saving of Existing Laws

In any large-scale legal and political transition, such as moving from colonial rule to an independent constitutional democracy, continuity becomes just as important as reform. Article 305 of the Indian Constitution reflects this principle of legal continuity by protecting laws that were already in force before the Constitution came into effect, even if they seem to contradict the promise of free trade under Article 301.

Intent Behind Article 305

When the Constitution of India was adopted in 1950, the country already had a complex body of laws, many of which governed trade, commerce, and taxation. Repealing all such laws overnight would have caused administrative chaos and legal uncertainty. Moreover, many of these laws were vital for maintaining public order, regulating economic activities, or safeguarding public health.

To avoid this disruption, Article 305 provides that nothing in Article 301 (freedom of trade and commerce) shall affect existing laws, or laws made in the future to amend or repeal those existing laws, until Parliament decides otherwise. In effect, it acts as a “savings clause”, temporarily protecting older legislation from being invalidated on the grounds of violating Article 301.

This provision ensured that a wide range of pre-Constitution laws, such as state excise laws, transport regulations, and commodity control orders, could continue to operate even if they imposed certain restrictions on trade or movement. For instance, if a law enacted in 1948 allowed a state to control the movement of food grains for rationing purposes, it would not be struck down merely because it contravenes the post-1950 principle of free trade under Article 301.

The safeguard provided by Article 305 continues until Parliament enacts new legislation that either repeals the older law or brings it in line with constitutional guarantees. This also means that existing laws cannot be allowed to violate the constitutional vision indefinitely; they must eventually evolve or be replaced through legislative reform.

Limits and Judicial Oversight

Though Article 305 gives temporary protection to older laws, it does not place them beyond judicial scrutiny. If a law is discriminatory, violates fundamental rights, or fails the test of proportionality under new constitutional standards, it can still be challenged in court.

Additionally, courts have often reiterated that the purpose of Article 305 is transitional, not permanent. The long-term goal remains to align all economic and trade-related laws with the spirit of free and fair commerce, as enshrined in Article 301.

What Happened to Article 306? (Repealed)

Originally, Article 306 was included in the Constitution as a transitional provision. It empowered provincial legislatures (a pre-independence term for state legislatures) to make laws imposing restrictions on trade and commerce until Parliament passed laws under Articles 302 and 304.

However, this article quickly became obsolete once Parliament began legislating actively after independence. The purpose of Article 306 was purely interim, it was to bridge the gap until proper legal mechanisms under the new Constitution were enacted.

As a result, it was repealed by the Constitution (Seventh Amendment) Act, 1956.

Why it was repealed:

Once India reorganized its states and established a more stable legislative system under the Constitution, transitional provisions like Article 306 were no longer needed.

Article 307: Appointment of Authority for Implementation

“Parliament may by law appoint such authority as it considers appropriate for carrying out the purposes of the provisions of this Part, and confer on the authority such powers and duties as it thinks necessary.”

This article empowers Parliament to create an authority/body to ensure that the objectives of Articles 301 to 304 (i.e., free trade and commerce) are properly implemented and disputes are managed.

Key Points:

• Permissive, not mandatory: Parliament may set up such an authority — it is not obligated to do so.
• Wide powers: The authority can be given all powers and duties that Parliament considers necessary to facilitate the free flow of commerce across India.
• Implementation tool: This is a mechanism to make the constitutional promise of free trade functionally real, not just symbolic.

But Here’s the Twist:

No such authority has been created under Article 307 to date.

Even after over 70 years of constitutional governance, Parliament has never enacted a law under Article 307 to formally set up a central trade authority for monitoring or facilitating interstate trade. Instead, most trade issues have been handled by ministries (e.g., the Commerce Ministry), the GST Council, and the judiciary.

GST and Economic Integration

The introduction of the Goods and Services Tax (GST) in 2017 marked a revolution in India’s economic federalism.

GST Impact:

• Abolished multiple indirect taxes: Excise, VAT, service tax, octroi, etc.
• Established a unified tax regime: Seamless movement of goods across states without checkpoints.
• Eases interstate commerce: Trucks crossing multiple states without delays or bribes at state borders.

GST truly operationalizes the dream of economic unity envisioned by Articles 301–305.

Landmark Cases on Constitutional Provisions on Interstate Trade and Commerce (Article 301-307)

In the case of Saghir Ahmad v. State of UP (1954), the Supreme Court addressed whether a state monopoly in transport services violated Article 301. The Uttar Pradesh government had nationalized road transport, restricting private operators. The Court questioned if such a monopoly infringed the freedom of trade and commerce but noted that the First and Fourth Constitutional Amendments protected state monopolies under Article 305 from being challenged under Article 301. The law was upheld as constitutional, clarifying that state monopolies in trade are immune from Article 301 challenges post-amendment.

In the case of Atiabari Tea Co. Ltd. v. State of Assam (1961), the appellants challenged the Assam Taxation Act, 1954, which imposed a tax on tea transported through Assam by road or inland waterways. The Supreme Court held that the tax directly restricted the movement of goods, violating Article 301’s guarantee of free trade and commerce. The Court ruled the Act void, emphasizing that any law imposing a direct impediment on the free flow of goods across states is unconstitutional unless saved by other provisions in Part XIII.

In the case of Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (1962), the state imposed an annual tax on motor vehicles (Rs. 60 for passenger vehicles and Rs. 2000 for goods vehicles). The appellants argued this violated Article 301. The Supreme Court clarified that regulatory or compensatory taxes that facilitate trade (e.g., for road maintenance) do not infringe Article 301, but taxes that directly restrict trade do. The Court upheld the tax as regulatory, establishing principles to distinguish between permissible regulatory measures and impermissible restrictions.

In the case of State of Bombay v. R.M.D. Chamarbaughwala (1957), the issue was whether gambling activities, specifically lotteries, constituted “trade” under Article 301. The Supreme Court held that gambling is not a lawful trading activity but res extra commercium (outside commerce). Thus, restrictions on lotteries did not violate Article 301. The judgment clarified that only lawful commercial activities are protected under the freedom of trade and commerce provisions.

In the case of G.K. Krishnan v. State of Tamil Nadu (1975), the Supreme Court examined whether a tax on passengers and goods transported by motor vehicles violated Article 301. The Court ruled that the freedom under Article 301 is not absolute and does not mean freedom from regulation. It distinguished between laws that restrict trade and those that regulate it, holding that non-discriminatory regulatory taxes facilitating trade are permissible. The tax was upheld as it did not directly impede interstate commerce.

In the case of Fatehchand v. State of Maharashtra (1977), the Court considered whether money-lending in rural areas qualified as a “trade” under Article 301. The state had imposed regulations on money-lenders to protect rural borrowers. The Supreme Court held that systematic money-lending is a trade and thus protected under Article 301. However, the regulations were upheld as reasonable restrictions in the public interest under Article 304(b), as they aimed to prevent exploitation.

In the case of B.R. Enterprises v. State of Uttar Pradesh (1999), the issue was whether state-run lotteries were protected as “trade” under Article 301. The Supreme Court reiterated that lotteries, whether private or state-run, are gambling activities and thus res extra commercium. Restrictions on lotteries did not violate Article 301, as they fall outside the scope of lawful trade and commerce. The Court upheld the state’s regulatory measures.

In the case of Jindal Stainless Steel Ltd. v. State of Haryana (2016), the appellants challenged an entry tax imposed by Haryana on goods imported from other states, alleging it violated Article 301. The Supreme Court held that only non-discriminatory taxes are valid under Article 304(a). Discriminatory taxes that favor local goods over imported ones are unconstitutional. The Court struck down the tax, reinforcing that Article 301 prohibits discriminatory fiscal barriers to interstate trade.

In the case of Lila Vati Bai v. State of Bombay (1957), the issue was whether an amendment to an existing law imposing a tax violated Article 301. The Supreme Court held that Article 305 protects existing laws and their amendments from being challenged under Article 301, provided the amendment does not fundamentally alter the law’s character. The tax was upheld as it was saved by Article 305, clarifying the scope of protection for pre-existing trade-related laws.

Verdict

The constitutional provisions on interstate trade and commerce are not merely legal formalities; they are crucial to India’s economic health and national integrity. Articles 301 to 305 establish a thoughtful balance of freedom, regulation, equity, and pragmatism.

By ensuring that goods, services, and people can move freely across a unified market, these provisions strengthen the economic sinews that hold this vast and diverse country together.

Yet, as history and experience show, laws alone are not enough. Constant judicial vigilance, cooperative federalism, robust infrastructure, and a spirit of national unity are equally essential.

Today, as India aspires to become a $5 trillion economy, the relevance of these constitutional ideals remains not just intact but more critical than ever. The dream of a truly borderless Indian economy, where opportunity flows as freely as the rivers that cross our states, is an ongoing journey, and it’s a journey that the Constitution proudly continues to guide.

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