Part XIII: Trade, Commerce, and Intercourse

Article 304: Restrictions on Trade and Commerce Among States

Original Article:

Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law—

• (a) 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; and
• (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:

Provided 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.

Explanations:

Article 304 provides the framework for imposing restrictions on trade, commerce, and intercourse among Indian states, balancing the freedom of trade with the need for regulation in the public interest. It serves as an exception to the broader provisions of Article 301, which guarantees free trade across India, and Article 303, which prohibits discriminatory taxation between states.

Clause-by-Clause Explanation:

Clause (a): Taxation on Imported Goods

This clause permits a state legislature to impose taxes on goods imported from other states or Union Territories, under the condition that these taxes are similar to those imposed on goods produced within the state. However, this provision prohibits discrimination in taxation between imported and locally produced goods.

Clause (b): Reasonable Restrictions in Public Interest

Clause (b) allows states to impose reasonable restrictions on trade, commerce, and intercourse within or with other states if it serves the public interest. Any bill or amendment to impose such restrictions requires prior approval from the President of India.

Real-Life Example:

States with significant agricultural production might use Article 304 to protect their farmers by taxing similar products coming from other states. For instance, during a health crisis, restrictions on the movement of goods might be imposed to prevent the spread of disease, provided these measures comply with public interest and receive presidential sanction.

Legislative History:

Article 304 was introduced to address economic disparities and protect local industries while maintaining a unified market. The Seventh Amendment in 1956 further clarified its application by including Union Territories under its purview.

Historical Significance:

Historically, this provision helped balance the autonomy of states with the overarching need for national integration. It enabled states to address local economic needs without compromising the principles of a unified market.