Q. Elucidate the Constitutional provision on Inter- State trade and commerce.

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In the Indian Constitution, the provisions regarding the freedom of trade, commerce and intercourse were adopted from the Constitution of Australia. According to Section 92 of the Australian Constitution, there should be freedom of trade, commerce and intercourse which may be carried out by ocean navigation or internal carriage.

In India, we do not copied it verbatim in our Constitution. It has been adopted with suitable modifications as:

1.  That the freedom guaranteed is not limited to among the states but ‘throughout the territory of India.

2.  Unlike the Australian counterpart, in our country, the freedom is not absolute as the rest of the provisions impose several restrictions and exceptions to this freedom.


1.  Article 301 applies not only to inter-State but also intra-state trade, commerce and intercourse

2.  The part 13 of the Constitution is not subject to any other part or provision of this constitution.


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The Object of Articles 301 To 307:

The objective behind the principle of freedom of inter-State commerce is that within the country trade and commerce should develop to the largest possible extent and it should not be hindered by artificial barriers and restrictions imposed by the various States of the federation. Accordingly, the Constitution has considered the largest interests of India as a whole as well as the interests of particular States and the wide geography of this country in which the interests of one region differ from those of another.


Freedom of trade, commerce, and intercourse

Article 301 talks about the freedom of trade, commerce, and intercourse throughout the country. It states that subject to other provisions under Part XIII, the freedom to carry on these activities shall be free. Freedom here means the right to freedom of movement of persons, property, things that may be tangible or intangible, unobstructed by barriers within the state (intra-scale) or across the states (inter-scale).

The freedom guaranteed by Article- 301 is freedom from all restrictions, except those which are provided for in the other provisions of part XIII (Arts-302 to 305). The freedom guaranteed by Article-301 is in the widest terms and applies to all forms of trade, commerce and intercourse. This freedom cannot be taken away by an executive action.


Meaning of the Terms Trade, Commerce and Intercourse:

The word ‘trade’ means ‘buying’ or ‘selling’ of goods while the term ‘commerce’ includes all forms of transportation such as by land, air or water. The term intercourse means movement of goods from one place to another place. Thus, Intercourse will cover all those activities which might not be included in the ambit of trade and commerce.


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Limitations/ Restrictions on Trade and Commerce [Articles-302 -305]:

Even though Article 301 provides that trade, commerce and intercourse should be free throughout the territory of India, this freedom is not absolute in nature. Certain restrictions are provided in the same part of the Constitution.

Article 302 gives power to the Parliament to impose restrictions on the freedom of trade, commerce or intercourse carried on within a state or across states anywhere in the territory of India, provided that the restrictions should be imposed in the interest of public and it should be reasonable.

In the case of Prag Ice & Oil Mills v. Union of India, it was held by the Supreme Court that even though Article 302 does not speak about reasonable restrictions, but still the restrictions which can be imposed under this Article should have a reasonable nexus with the public interest for which the restriction is placed.


Exception for this section

While the Parliament has the power to impose restrictions on the freedom of trade in any State or part of the territory of India, this power is subjected to the provisions of Article 303 of the Indian Constitution, which provides that no discriminatory restriction can be made by the Parliament which gives benefit to one State while the other States are excluded from such benefit. Although this restriction is subjected to clause 2 of the sane article, which states that in case of scarcity in a State, the Parliament can be allowed to impose such discriminatory restrictions so that the State which is facing the problem of scarcity to overcome it.


Further, Article 304 provides that A State Legislature may impose on goods and services, imported from other States any tax if similar goods produced in that State also are taxed in a like manner. A State Legislature is also authorized to impose reasonable restrictions on the freedom of trade and commerce with or within that State as may be required in the public interest.


Important Cases

Atiabari Tea Co. V. State of Assam: in this case, a question was addressed that Any kind of tax that is levied on any particular activity which involves inter-state transaction can be taken to be a restriction on the freedom of trade or not?

The Apex court held that tax laws are not outside the scope of ‘the Freedom'. And therefore, the Assam State Legislature had to amend the provision as to meet the requirements of the exception in Article 304(b) so that the tax that it imposed did not amount to a direct and immediate impact of the movement of the goods.

In State of Mysore V. Sanjeeviah, the Government made a rule under the Mysore Forest Act, 1900, banning movement of forest produce between sunlight and sunrise. The Supreme Court held the rule void as it was not a ‘regulatory’ but ‘restrictive’ measure which infringed the right guaranteed under Art.301.

In Automobile Transport Ltd. V. State of Rajasthan, the appellant challenged the validity of the Rajasthan Motor Vehicles taxation Act, 1951, as violating Art-301. The State Govt imposed a tax on all motor vehicles used and kept within the State of Rajasthan. The Court held that the tax valid as they were only regulatory measures imposing compensatory taxes for facilitating trade, commerce and intercourse.



The objective behind the principle of freedom of inter-State commerce is that within the country trade and commerce should develop to the largest possible extent and it should not be hindered by artificial barriers and restrictions imposed by the various States of the federation. The framers of the Indian Constitution had the benefit of the experiences at the time of drafting the provisions dealing with inter-State trade and commerce as embodied in the Constitution.


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