Article 301 of the Constitution of India says: “Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.” It is the opening article of Part XIII, “Trade, Commerce and Intercourse within the Territory of India”, which runs from Article 301 to Article 307. Together these articles are meant to make India one market, so that goods and trade can move from one State to another without being blocked or taxed unfairly at State borders, while still allowing Parliament and the States to impose restrictions that the public interest requires. This guide explains each article in plain English, the Supreme Court cases that shaped them (Atiabari Tea, Automobile Transport and the nine-judge Jindal Stainless judgment of 2016), how Part XIII differs from the fundamental right in Article 19(1)(g), which list of the Seventh Schedule covers trade, and what GST changed.
Articles 301 to 307 at a glance
- Article 301: trade, commerce and intercourse throughout India “shall be free”, subject to the rest of Part XIII.
- Article 302: Parliament may impose restrictions “as may be required in the public interest”.
- Article 303: neither Parliament nor a State may prefer one State over another or discriminate between States through a trade-and-commerce entry, except that Parliament may do so to deal with “scarcity of goods”.
- Article 304: a State may (a) tax goods from other States if similar local goods are taxed, without discrimination, and (b) impose reasonable restrictions in the public interest, but a Bill for (b) needs the President’s previous sanction.
- Article 305: saves existing laws and laws for State monopolies; Article 306 was omitted in 1956; Article 307 lets Parliament appoint an authority for Articles 301 to 304.
- Key cases: Atiabari Tea (1960); Automobile Transport (1962); Jindal Stainless (2016, nine judges): non-discriminatory taxes do not violate Article 301.
- Lists: inter-State trade and commerce is in the Union List (entry 42); trade and commerce within a State is in the State List (entry 26).
Reviewed and updated by Century Law Firm, Delhi – October 2026. Statutory references are to the Acts as in force on that date.
Why the Constitution has a Part on free trade
A country made up of States can easily become a set of separate markets if each State is free to tax or block goods coming from its neighbours. Part XIII exists to prevent that. The Supreme Court described the framers’ approach in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (1962): “In evolving an integrated policy on this subject our Constitution-makers seem to have kept in mind three main considerations which may be broadly stated thus: first, in the larger interests of India there must be free flow of trade, commerce and intercourse, both inter-State and intra-State; second, the regional interests must not be ignored altogether; and third, there must be a power of intervention by the Union in any case of crisis to deal with particular problems that may arise in any part of India.”
A common exam question asks which country the idea came from. The Supreme Court answered it in State of Bombay v. R.M.D. Chamarbaugwala (1957): “In the Commonwealth of Australia Constitution Act … there is s. 92 from which our Art. 301 appears to have been taken.” In Atiabari Tea Co. v. State of Assam (1960), Justice Gajendragadkar added that the framers had before them Section 297 of the Government of India Act, 1935, and that “The history of judicial decisions interpreting s. 92 of the Australian Constitution must have been present to their minds as also the history of the growth and development of the American Law under the commerce clause in the American Constitution.”
The seven articles, one by one
How Part XIII balances free trade across India with the powers of Parliament and the States.
Article 301: freedom of trade, commerce and intercourse
The article is short: “Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.” Two words in it matter most. “Throughout” means the freedom covers trade within a State as well as trade between States. “Subject to the other provisions of this Part” means the freedom is not absolute: Articles 302 to 305 set out who may restrict it and how.
The definitions article of the Constitution, Article 366, does not define “trade”, “commerce” or “intercourse”. In Chamarbaugwala (1957) the Supreme Court said it was not necessary “to attempt an exhaustive definition” of these words, but it held that gambling is not trade: “We are convinced and satisfied that the real purpose of Arts. 19(1)(g) and 301 could not possibly have been to guarantee or declare the freedom of gambling. Gambling activities from their very nature and in essence are extra-commercium although the external forms, formalities and instruments of trade may be employed and they are not protected either by Art. 19(1)(g) or Art. 301 of our Constitution.”
Article 302: restrictions by Parliament
“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.” Parliament’s power is wide, covering both inter-State and intra-State trade, and its only stated limit is the public interest. Article 303 then adds a limit on discrimination.
Article 303: no preference, no discrimination between States
Article 303(1) provides that, notwithstanding Article 302, “neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.” Article 303(2) carves out a single exception for Parliament: a preference or discrimination is allowed “if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.” The exception is about scarcity, not general development; and it is available only to Parliament, not to State Legislatures.
Article 304: what a State may do
Article 304 begins, “Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law” and then gives two powers. Under clause (a) it may “impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced”. The words “or the Union territories” were added by the Seventh Amendment in 1956. Under clause (b) it may “impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest”, with the proviso that “no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.”
Readers sometimes search for “Article 304A”. There is no such article; Article 304 has two clauses, (a) and (b), and the nine-judge bench in Jindal Stainless held that they “have to be read disjunctively”, that is, as separate powers, each with its own conditions.
Article 305: existing laws and State monopolies
Article 305, as substituted by the Constitution (Fourth Amendment) Act, 1955 with effect from 27 April 1955, reads: “Nothing in articles 301 and 303 shall affect the provisions of any existing law except in so far as the President may by order otherwise direct; and nothing in article 301 shall affect the operation of any law made before the commencement of the Constitution (Fourth Amendment) Act, 1955, in so far as it relates to, or prevent Parliament or the Legislature of a State from making any law relating to, any such matter as is referred to in sub-clause (ii) of clause (6) of article 19.” That sub-clause covers “the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise”. In short, laws creating State monopolies, such as nationalised transport, are protected from challenge under Article 301.
The background is Saghir Ahmad v. State of U.P. (decided 13 October 1954 by five judges). Under the scheme of the U.P. Road Transport Act, 1951, “the State Government shall have the exclusive right to operate Road Transport Services”. The Supreme Court held that the legislation violated the appellants’ fundamental right under Article 19(1)(g), was not shown to be protected by Article 19(6) as it then stood, and was void, and it found it unnecessary to decide the Article 301 question. The Supreme Court later described the 1955 change as substituting for the original Article 305 “another article, some what wider in scope”. Article 305 does not deal with treaties or international agreements.
Articles 306 and 307
Article 306, “Power of certain States in Part B of the First Schedule to impose restrictions on trade and commerce”, was omitted by the Constitution (Seventh Amendment) Act, 1956 with effect from 1 November 1956. Article 307 provides: “Parliament may by law appoint such authority as it considers appropriate for carrying out the purposes of articles 301, 302, 303 and 304, and confer on the authority so appointed such powers and such duties as it thinks necessary.”
Taxes and Article 301: from Atiabari to Jindal Stainless
The most contested question under Part XIII has been whether a tax can be a “restriction” on the freedom of trade. The answer changed over fifty years.
Atiabari Tea Co. v. State of Assam (decided 26 September 1960, five judges). Assam taxed tea and jute carried by road or inland waterway under the Assam Taxation (on Goods carried by Roads or Inland Waterways) Act, 1954. The majority held that “taxing laws are not excluded from the operation of Art. 301”, and that “If the transport or the movement of goods is taxed solely on the basis that the goods are thus carried or transported that, in our opinion, directly affects the freedom of trade as contemplated by Art. 301.” It laid down the test, as later quoted: restrictions forbidden by Article 301 “would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade.” Because the President’s previous sanction required by Article 304(b) had not been obtained, and the defect had not been cured under Article 255, the Assam law was declared void, by a majority of four to one.
Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (decided 9 April 1962, seven judges). Rajasthan levied a tax on motor vehicles. By a majority of four to three, the Court accepted Atiabari “subject to this clarification”: “Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Art. 301 and such measures need not comply with the requirements of the proviso to Art. 304(b) of the Constitution.” The motor vehicle tax was held to be compensatory or regulatory, and valid. This “compensatory tax” idea governed the law for decades.
Jindal Stainless Ltd. v. State of Haryana (decided 11 November 2016, nine judges). Several States had levied entry taxes on goods entering a local area, and the challenge reached a bench of nine judges. By majority, the Court answered the reference in these terms, among others: “Taxes simpliciter are not within the contemplation of Part XIII of the Constitution of India. The word ‘Free’ used in Article 301 does not mean ‘free from taxation’.” “Only such taxes as are discriminatory in nature are prohibited by Article 304(a). It follows that levy of a non-discriminatory tax would not constitute an infraction of Article 301.” “A levy that violates 304(a) cannot be saved even if the procedure under Article 304(b) or the proviso there under is satisfied.” “The compensatory tax theory evolved in Automobile Transport case and subsequently modified in Jindal’s case has no juristic basis and is therefore rejected.” Atiabari, Automobile Transport and the 2006 Jindal judgment were overruled to the extent of such reliance.
The Court also held that “A tax on entry of goods into a local area for use, sale or consumption therein is permissible although similar goods are not produced within the taxing state”, and that Article 304(a) “frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation”, so that time-limited incentives to develop backward areas would not violate it. Whether the particular levies before it passed these tests was left to regular benches, and two questions, whether an entire State can be notified as a local area and whether entry tax can be levied on goods coming from another country, were left open.
GST and Part XIII
The Constitution (One Hundred and First Amendment) Act, 2016, which introduced the Goods and Services Tax, did not amend Articles 301 to 307. It did change the taxing powers around them. A new Article 246A(2) gives Parliament “exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce”, and Article 269A(1) provides that GST on inter-State supplies “shall be levied and collected by the Government of India” and apportioned between the Union and the States. Entry 52 of the State List, under which States had levied entry taxes, was omitted, and the GST Council’s own account lists “Entry Tax” among the State taxes subsumed in GST, which was implemented on 1 July 2017. The entry tax disputes that produced Jindal Stainless are therefore largely historical, but the principles the case laid down about Article 301 and Article 304(a) still govern any State tax or restriction that touches trade with other States.
Which list covers trade and commerce?
The Seventh Schedule divides the subject. In the Union List, entry 41 covers “Trade and commerce with foreign countries; import and export across customs frontiers” and entry 42 covers “Inter-State trade and commerce”. In the State List, entry 26 covers “Trade and commerce within the State subject to the provisions of entry 33 of List III”. In the Concurrent List, entry 33 covers trade and commerce in, and the production, supply and distribution of, the products of industries that Parliament has declared should be under Union control (and similar imported goods), foodstuffs including edible oilseeds and oils, cattle fodder, raw cotton and cotton seed, and raw jute. So the statement “inter-State trade and commerce is a State subject” is wrong: it is a Union subject.
Article 301 and Article 19(1)(g) compared
Article 19(1)(g) is a fundamental right in Part III: “All citizens shall have the right … to practise any profession, or to carry on any occupation, trade or business.” It belongs to citizens, and Article 19(6) lets the State impose “reasonable restrictions” on it “in the interests of the general public”, and make laws on professional qualifications and on State trading and monopolies. Article 301 sits outside Part III, in Part XIII, and is framed not as a right of a person but as a declaration that trade throughout India “shall be free”. The two often appear together; Chamarbaugwala, for instance, held that gambling is protected by neither. The practical difference is in the restrictions: Article 19(6) governs limits on an individual’s freedom to trade, while Articles 302 to 305 govern limits on the free flow of trade across the country, with the special rules against discrimination between States and the requirement of Presidential sanction for State restrictions.
व्यापार, वाणिज्य और समागम की स्वतंत्रता (अनुच्छेद 301-307) – हिंदी में
संविधान का भाग XIII (अनुच्छेद 301 से 307) भारत के राज्यक्षेत्र के भीतर व्यापार, वाणिज्य और समागम की स्वतंत्रता से संबंधित है। अनुच्छेद 301 कहता है कि इस भाग के अन्य उपबंधों के अधीन रहते हुए भारत के पूरे राज्यक्षेत्र में व्यापार, वाणिज्य और समागम अबाध (free) होगा। अनुच्छेद 302 के तहत संसद लोकहित में आवश्यक प्रतिबंध लगा सकती है। अनुच्छेद 303 संसद और राज्य विधानमंडल दोनों को व्यापार-वाणिज्य संबंधी प्रविष्टियों के आधार पर एक राज्य को दूसरे पर तरजीह देने या राज्यों के बीच भेदभाव करने से रोकता है; केवल संसद, माल की कमी (scarcity of goods) की स्थिति से निपटने के लिए, ऐसा कर सकती है।
अनुच्छेद 304(क) के तहत राज्य दूसरे राज्यों या संघ राज्यक्षेत्रों से आने वाले माल पर वही कर लगा सकता है जो उस राज्य में बने समान माल पर लगता है, बशर्ते भेदभाव न हो; और 304(ख) के तहत लोकहित में युक्तियुक्त प्रतिबंध लगा सकता है, पर ऐसा विधेयक राष्ट्रपति की पूर्व मंजूरी से ही पेश हो सकता है। अनुच्छेद 305 मौजूदा कानूनों और राज्य के एकाधिकार (State monopoly) वाले कानूनों को बचाता है; अनुच्छेद 306 वर्ष 1956 में हटा दिया गया; और अनुच्छेद 307 के तहत संसद इन अनुच्छेदों के प्रयोजन के लिए प्राधिकारी नियुक्त कर सकती है।
सुप्रीम कोर्ट ने चमारबागवाला (1957) में कहा कि हमारा अनुच्छेद 301 ऑस्ट्रेलिया के संविधान की धारा 92 से लिया गया प्रतीत होता है, और जुआ “व्यापार” नहीं है। अतियाबारी टी (1960) में कोर्ट ने कहा कि जो प्रतिबंध व्यापार के प्रवाह को सीधे और तुरंत रोकते हैं वे अनुच्छेद 301 के दायरे में हैं; ऑटोमोबाइल ट्रांसपोर्ट (1962) में नियामक या प्रतिपूरक (compensatory) करों को इससे बाहर रखा गया; और जिंदल स्टेनलेस (2016) में नौ न्यायाधीशों की पीठ ने कहा कि केवल भेदभावपूर्ण कर ही वर्जित हैं और प्रतिपूरक कर का सिद्धांत खारिज कर दिया। अंतर-राज्य व्यापार और वाणिज्य संघ सूची (प्रविष्टि 42) का विषय है, जबकि राज्य के भीतर व्यापार राज्य सूची (प्रविष्टि 26) में है।
Frequently asked questions
It is the guarantee in Article 301 of the Constitution that “Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.” It aims to keep India a single market, free of unjustified barriers between and within States.
Part XIII, Articles 301 to 307: Article 301 states the freedom; Articles 302, 303 and 304 set out the powers of Parliament and the States to restrict it; Article 305 saves existing laws and laws on State monopolies; Article 306 has been omitted; and Article 307 allows Parliament to appoint an authority to carry out Articles 301 to 304.
No. Article 301 itself is “Subject to the other provisions of this Part”. Parliament may impose restrictions in the public interest (Article 302), States may impose non-discriminatory taxes and reasonable restrictions (Article 304), and laws on State monopolies are saved (Article 305).
It lets a State Legislature (a) tax goods imported from other States or Union territories if similar goods produced in the State are taxed, without discriminating between them, and (b) impose reasonable restrictions on trade with or within the State in the public interest. A Bill under clause (b) can be introduced only with the President’s previous sanction.
No. Article 304 has two clauses, (a) and (b). The Supreme Court held in Jindal Stainless (2016) that they must be read disjunctively, as separate powers.
Australia. The Supreme Court said in State of Bombay v. R.M.D. Chamarbaugwala (1957) that section 92 of the Australian Constitution is the provision “from which our Art. 301 appears to have been taken”. The framers had Section 297 of the Government of India Act, 1935 before them, and, in the words of Atiabari Tea (1960), the history of American law under the commerce clause “must have been present to their minds”.
The Constitution does not define it. It appears together with “trade” and “commerce”, and the Supreme Court’s decisions under Article 301 concern restrictions that “directly and immediately restrict or impede the free flow or movement of trade”.
No. “Inter-State trade and commerce” is entry 42 of the Union List. “Trade and commerce within the State”, subject to entry 33 of the Concurrent List, is entry 26 of the State List.
Article 19(1)(g) is a fundamental right of citizens to practise any profession or carry on any occupation, trade or business, subject to reasonable restrictions under Article 19(6). Article 301, in Part XIII, declares that trade throughout India shall be free and is limited by Articles 302 to 305, with special rules against discrimination between States.
Yes, under Article 304(a), if similar goods produced within the State are taxed and the tax does not discriminate between the two. The nine-judge bench in Jindal Stainless (2016) held that “levy of a non-discriminatory tax would not constitute an infraction of Article 301”. Since 1 July 2017, GST has subsumed State entry taxes.
In 1960 a five-judge bench held, by a majority of four to one, that taxing laws are not outside Article 301, that restrictions which “directly and immediately restrict or impede the free flow or movement of trade” fall within it, and that Assam’s tax on goods carried by road or inland waterway was void because the Article 304(b) procedure had not been followed.
A nine-judge bench held by majority that taxes simpliciter are not within Part XIII, that “free” in Article 301 does not mean “free from taxation”, that only discriminatory taxes are prohibited by Article 304(a), that the compensatory tax theory has no juristic basis, and that entry tax on goods entering a local area is permissible even if similar goods are not produced in the State.
No. In State of Bombay v. R.M.D. Chamarbaugwala (1957) the Supreme Court held that gambling activities are “extra-commercium” and “are not protected either by Art. 19(1)(g) or Art. 301”.
Article 306, which dealt with the power of certain Part B States to restrict trade and commerce, was omitted by the Constitution (Seventh Amendment) Act, 1956 with effect from 1 November 1956.
Article 303(1) provides that, notwithstanding Article 302, “neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.” Article 303(2) allows one exception, for Parliament alone: a law may give such a preference or make such a discrimination “if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.” Article 303 gives the State Legislatures no such exception; their power is in Article 304, which applies “Notwithstanding anything in article 301 or article 303” but allows only a tax that does not “discriminate between goods so imported and goods so manufactured or produced” (clause (a)), or “reasonable restrictions … as may be required in the public interest”, with the President’s previous sanction for the Bill (clause (b)).
Whether a law or tax violates Part XIII is decided by the courts, and ultimately by the Supreme Court. Three decisions shaped the law. In Atiabari Tea Co. v. State of Assam (1960) a five-judge bench, by majority, held that restrictions forbidden by Article 301 are those which “directly and immediately restrict or impede the free flow or movement of trade”, and, by four to one, struck down Assam’s tax on goods carried by road or inland waterway because the President’s previous sanction required by Article 304(b) had not been obtained and the defect had not been cured under Article 255. In Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (1962) a seven-judge bench upheld Rajasthan’s tax by four to three; S.K. Das J., for himself and two other judges, accepted that view “subject to this clarification”: “Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Art. 301”. In Jindal Stainless Ltd. v. State of Haryana (2016) a nine-judge bench held, by majority, that “Taxes simpliciter are not within the contemplation of Part XIII”, that only discriminatory taxes are prohibited by Article 304(a), and that the compensatory tax theory “has no juristic basis and is therefore rejected”.
The Supreme Court has said that Article 301 appears to have been taken from section 92 of the Australian Constitution, which provides that trade, commerce and intercourse among the States “shall be absolutely free”; India’s Article 301 is instead “Subject to the other provisions of this Part”, so Parliament and the States keep the powers in Articles 302 to 305. The Court added in the same case, State of Bombay v. R.M.D. Chamarbaugwala (1957), that Australian decisions on section 92 should be “used with caution and circumspection”. In Atiabari Tea Co. (1960) Justice Gajendragadkar said that, just as the framers had before them Section 297 of the Government of India Act, 1935, the history of decisions on section 92 of the Australian Constitution “must have been present to their minds as also the history of the growth and development of the American Law under the commerce clause in the American Constitution”.
In Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (1962) the Supreme Court accepted the Atiabari view that restrictions which “directly and immediately restrict or impede the free flow or movement of trade” fall within Article 301, “but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Art. 301 and such measures need not comply with the requirements of the proviso to Art. 304(b) of the Constitution.” On that basis a majority of four to three upheld Rajasthan’s motor vehicle tax as compensatory or regulatory. In Jindal Stainless (2016) the nine-judge bench rejected the compensatory tax theory as having “no juristic basis” and overruled Atiabari and Automobile Transport “to the extent of such reliance”, holding that taxes as such are outside Part XIII and that only discriminatory taxes are barred by Article 304(a).
Article 305 reads: “Nothing in articles 301 and 303 shall affect the provisions of any existing law except in so far as the President may by order otherwise direct; and nothing in article 301 shall affect the operation of any law made before the commencement of the Constitution (Fourth Amendment) Act, 1955, in so far as it relates to, or prevent Parliament or the Legislature of a State from making any law relating to, any such matter as is referred to in sub-clause (ii) of clause (6) of article 19.” So it saves laws that existed when the Constitution began, unless the President directs otherwise, and it protects laws on State trading and State monopolies from challenge under Article 301. It has nothing to do with international agreements; Parliament’s power to legislate for treaties is in Article 253.
Yes. Article 307 provides: “Parliament may by law appoint such authority as it considers appropriate for carrying out the purposes of articles 301, 302, 303 and 304, and confer on the authority so appointed such powers and such duties as it thinks necessary.”
Because a country made up of States can become a set of separate markets if each State may tax or block goods from its neighbours. The Supreme Court described the framers’ approach in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (1962): “In evolving an integrated policy on this subject our Constitution-makers seem to have kept in mind three main considerations which may be broadly stated thus: first, in the larger interests of India there must be free flow of trade, commerce and intercourse, both inter-State and intra-State; second, the regional interests must not be ignored altogether; and third, there must be a power of intervention by the Union in any case of crisis to deal with particular problems that may arise in any part of India.” Part XIII balances those three aims: Article 301 states the freedom, Article 304 preserves a limited power for the States, and Articles 302 and 303(2) give Parliament the power to intervene.
A State Legislature may, under Article 304(b), “impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest”, but “no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.” A restriction justified on health grounds must therefore be reasonable and required in the public interest, and the Bill needs the President’s previous sanction (a missing sanction is cured if the President assents to the Act: Article 255); Part XIII does not list health as a separate ground. In Atiabari Tea Co. (1960) Assam’s Act was declared void because the previous sanction had not been obtained and the defect had not been cured under Article 255.
Under the nine-judge decision in Jindal Stainless (2016), “Taxes simpliciter are not within the contemplation of Part XIII” and “Only such taxes as are discriminatory in nature are prohibited by Article 304(a)”. So, under Part XIII, the question for an environmental levy on goods is whether it discriminates between goods imported from other States and similar goods produced in the State; the Court added that States “are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State fall equally”. From 1 July 2017 GST replaced State taxes including State VAT, purchase tax and entry tax (taxes on vehicles and State excise duty and VAT on potable alcohol were not subsumed), and Articles 246A and 269A now also govern the taxing powers.
Not through a discriminatory tax. Article 304(a) allows a State to tax goods imported from other States only “so, however, as not to discriminate between goods so imported and goods so manufactured or produced” in the State, and Article 303(1) denies both Parliament and the State Legislatures the power to give “any preference to one State over another” or to discriminate between States through a trade-and-commerce entry. Article 304, however, applies “Notwithstanding anything in article 301 or article 303”, so any other State restriction must meet Article 304(b) (reasonable, “required in the public interest”, and the President’s previous sanction for the Bill), while a discriminatory tax cannot be saved that way (Jindal Stainless, conclusion 4). In Jindal Stainless (2016) the Supreme Court held that Article 304(a) “frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation”, so that incentives or set-offs granted to a specified class of dealers for a limited period, in a non-hostile fashion, to develop economically backward areas would not violate it.
“Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors” is entry 8 of the State List, so the States legislate on it. Article 47 of the Constitution, a Directive Principle, says the State “shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health”.
Article 304(b) has three requirements: the restriction must be reasonable, it must be “required in the public interest”, and the Bill or amendment must have had “the previous sanction of the President” before being introduced or moved in the State Legislature, although a missing sanction is cured if the President assents to the Act (Article 255). In Atiabari Tea Co. (1960) the Court listed these “three conditions” and declared Assam’s tax void because the previous sanction had not been obtained and the defect had not been cured under Article 255. In Jindal Stainless (2016) the Supreme Court held that clauses (a) and (b) of Article 304 “have to be read disjunctively” and that “A levy that violates 304(a) cannot be saved even if the procedure under Article 304(b) or the proviso there under is satisfied.”
Conclusion
Part XIII is built on a simple promise, that trade throughout India shall be free, and a careful set of exceptions. Parliament may restrict trade in the public interest but may favour a State only to meet a scarcity of goods; a State may tax goods from elsewhere only as it taxes its own, and may restrict trade only reasonably, in the public interest and with the President’s prior sanction; and State monopolies are protected. After Jindal Stainless the question for any tax is whether it discriminates against goods from other States, not whether it is “compensatory”; and after GST, most of the old border taxes have gone, leaving Article 301 as the guarantee against new ones.
Sources used for this post: the Constitution of India, as on 10 September 2026 (Legislative Department’s diglot edition): Articles 19, 301 to 307 and 366, the footnotes recording the Fourth and Seventh Amendments, and the Seventh Schedule (List I entries 41 and 42, List II entry 26, List III entry 33); the Constitution (One Hundred and First Amendment) Act, 2016 and the GST Council’s publications “The GST Saga” and the FAQ for traders; and the Supreme Court of India’s own copies of Saghir Ahmad v. State of U.P. (13 October 1954), State of Bombay v. R.M.D. Chamarbaugwala (9 April 1957), Atiabari Tea Co. v. State of Assam (26 September 1960), Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (9 April 1962), Jindal Stainless Ltd. v. State of Haryana (2006) and Jindal Stainless Ltd. v. State of Haryana (11 November 2016).
