Inter State Trade and Commerce

In the last few articles, we discussed Administrative Relationship between the Centre and States, Legislative Relations between the Centre and States, and Financial Relations between the Centre and States, so, continuing our discussions on the relations between the Centre and States and between the States, today we’ll be discussing the inter state trade and commerce.

Inter-State Trade and Commerce

Constitutional Provisions

Articles 301 to 307 included in Part XIII of the Indian Constitution deals with the provisions relating to trade, commerce and intercourse within the territory of India.

Article 301

Article 301 of the Indian Constitution states that trade, commerce and intercourse throughout the territory of India shall be free. The main objective of the provision mentioned in Article 301 is to break down the border barriers between the states, which act as a disruption to the free trade and commerce, and to create one unit with a view to encouraging the flow of trade, commerce, and intercourse within the country.

Moreover, the provision of freedom in this article is not confined to inter-state trade, commerce and intercourse in the country, but it also extends to intra-state trade, commerce and intercourse. This means that Article 301 would be violated whether restrictions are imposed at the frontier of any stage or at any prior or subsequent stage.

Exceptions to the freedom granted under Article 301

The provisions of Article 301 provide for the freedoms to inter-state trade and commerce, with a clear objective to facilitate a smooth trade flow between the states and prevent undesirable effects on the economy of the states and the country. However, the article also provides for certain exceptions to this freedom. These exceptions are provided in other provisions in Articles 302 to 305 of Part XIII of the Constitution. These exceptions are:

The Parliament of India can impose restrictions on the freedom of trade, commerce and intercourse between the states or within a state in the public interest. But the Parliament cannot give preference to one state over the other or discriminate between the States unless there is a scarcity of goods in any part of the country.
The Legislature of any State can impose any tax on the goods imported from other States and Union Territories to which similar goods manufactured in that state are subject. However, the provisions prevent the States from imposing any discriminatory taxes.
The State Legislature can impose reasonable restrictions on the freedom of trade, commerce and intercourse with that state or within that state in the public interest. But however, a Bill that provisions for such reasonable restrictions could be introduced in that State Legislature only with the previous sanction of the President.
The State Legislature cannot give preference to one state over another or discriminate between the states.
The freedom of trade, commerce and intercourse provided under Article 301 is subject to nationalisation laws*. Thus, the Parliament of India or the State Legislature can make laws for the carrying on by the respective government of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise.
- *Nationalisation laws: laws providing for monopolies in favor of the Centre or the States.

In order to carry out the purposes of the above-mentioned provisions related to the freedom of trade, commerce, and intercourse and restrictions on it, the Parliament of India can appoint an appropriate authority. The Parliament can confer on that authority, such powers and duties that are necessary for carrying out the functions. However, to date, no such authority has been appointed by the Indian Parliament.

So, it’s clear that the Constitution of India provides clear-cut provisions to promote inter-state trade and commerce and prevent any frictions in the smooth flow of trade between them.