Actual Article
Article 304: Restrictions on trade, commerce, and intercourse among States
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.
UPSC Notes for Article 304
Explanation:
- Taxation of Imported Goods: Clause (a) allows State Legislatures to impose taxes on goods imported from other States or Union Territories, provided these taxes are similar to those imposed on goods manufactured or produced within the State, ensuring non-discrimination.
- Reasonable Restrictions: Clause (b) permits State Legislatures to impose reasonable restrictions on the freedom of trade, commerce, or intercourse within the State, provided these restrictions are in the public interest and have the previous sanction of the President.
Key Points:
- Economic Equity: Ensures that imported goods are not given an unfair advantage over locally manufactured goods by subjecting both to similar taxation.
- Public Interest: Allows States to impose necessary restrictions to protect public interest, such as health and safety regulations, environmental protection, and maintaining public order.
- Presidential Sanction: Requires that any restrictive measures under clause (b) receive prior approval from the President, ensuring a check on State power and maintaining a balance between State autonomy and national interest.
Important Cases and Commissions Related to Article 304
Cases:
- Shree Mahavir Oil Mills vs. State of Jammu & Kashmir (1996): The Supreme Court held that State laws imposing taxes on imported goods must ensure non-discrimination between imported and locally manufactured goods.
- Saghir Ahmed vs. State of U.P. (1954): The Court emphasized that restrictions imposed by States under Article 304(b) must be reasonable and in the public interest.
Commissions:
- Finance Commission: Reviews and recommends measures to ensure equitable taxation and trade practices among States.
- Law Commission of India: Examines the legal framework for trade and commerce and suggests reforms to ensure compliance with constitutional provisions.
Important Reports Related to Article 304:
- Finance Commission Reports: Analyze the impact of State taxation and trade restrictions on inter-state commerce and recommend measures for equitable and fair practices.
- Law Commission Reports: Discuss the legal aspects of imposing restrictions on trade and commerce and recommend improvements to ensure fairness and public interest.
Previous Year Prelims Questions Related to Article 304
- (UPSC Prelims 2016) What does Article 304(a) of the Indian Constitution allow State Legislatures to do?
- A. Impose taxes on services
- B. Impose taxes on goods imported from other States or Union Territories
- C. Impose restrictions on trade and commerce
- D. Impose taxes on agricultural produce Correct Answer: B. Impose taxes on goods imported from other States or Union Territories
- (UPSC Prelims 2018) Under Article 304(b), what is required before a State Legislature can introduce a Bill imposing reasonable restrictions on trade, commerce, or intercourse?
- A. Approval from the Supreme Court
- B. Previous sanction of the President
- C. Approval from the Prime Minister
- D. Approval from the Union Cabinet Correct Answer: B. Previous sanction of the President
Previous Year Mains Questions Related to Article 304
- Mains 2016: “Discuss the significance of Article 304 in ensuring economic equity and public interest within States. How does this article balance State autonomy and national interest?”
- Mains 2019: “Evaluate the impact of Article 304 on inter-state trade and commerce. What are the challenges and benefits associated with State-imposed taxes and restrictions under this article?”
Additional Insights:
- Promoting Fair Competition: Article 304 ensures fair competition between local and imported goods by allowing States to impose similar taxes, preventing market distortions.
- Regulating Trade: The provision for reasonable restrictions allows States to address specific public interest concerns, such as health, safety, and environmental protection, while ensuring these measures are justified and approved at the national level.
- Balancing Interests: By requiring Presidential sanction for restrictive measures, the article maintains a balance between State autonomy and the overall economic interests of the nation, preventing arbitrary or protectionist policies.
Understanding Article 304 is crucial for UPSC aspirants as it provides insights into the constitutional mechanisms for regulating inter-state trade and commerce, emphasizing the importance of economic equity, public interest, and balanced governance. This knowledge is essential for both preliminary and main examinations, offering a comprehensive understanding of the constitutional provisions and their impact on economic governance within the Indian Constitution.