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Article submitted by Shanti Gupta, Indian Institute of legal Studies, Siliguri.


To protect the national economic, prevention of local barrier or hurdles in economic activities is an attempt taken by all federations. In the Indian Constitution, provisions are provided to help to utilise various economic resources for the common advantage of all. This paper is an attempt to discuss in brief the meaning of trade, objective of freedom of trade and commerce, also to analyse the Scope of article 301 and restriction to trade.

Keywords: Article, Trade, Commerce, Intercourse, Business, Restriction, Government.


Trade is an essential phenomenon as we know that not all the states or the countries have all the resources to produce the product which they need. This is why we need a law governing body and rules to facilitate trade. In Indian constitution freedom of trade, commerce and intercourse are provided under Part XIII containing seven articles- Article 301 to 307. Article 301 is a general provision related to freedom of trade, Commerce and intercourse throughout the territory of India, where as Article 302 to 305 are provisions related to restrictions, subjected to free flow of trade and commerce which should not be interfered by any other provisions of Constitution. Article 306 has been repealed.


There are three main objectives of freedom of trade and commerce which is to ensure that the economy of India should not be affected because of internal barriers. The objectives are as follows:

1. To sustain the progress of country.

2. To break down the border barriers between state.

3. To encourage the free flow of trade.


The word 'trade' means buying or selling of goods, excluding the manufacturing process. The word 'commerce' includes all forms of transportation by land, air or water. The word 'intercourse' means movement of goods from one place to another place.

Article 301 declares that trade, commerce and intercourse throughout the territory of India shall be free, subject to certain restrictions. This Article has been adopted from Section 92 of the Australian Constitution. This article was included to remove the state customary hurdles. But in India, freedom of trade is wider than the freedom of Australian trade under section 92. Article 301 includes both the freedom of inter-state and intra-state trade.

In this era, the concept is so wide that the freedom of trade, commerce and intercourse involves advertising on radios, transmission on telephone and movement from one place to another which are non- commercial. The scope of trade, commerce and intercourse can be thus affected by any laws regulating any of these associating aspects. For instance, it can happen that for advertising on radio a pre-condition of having license has been imposed by law then the freedom of trade and commerce will be violated or if for the electricity which is available in any locality, a law is made that modulate the hours on the flow of electricity, the law will violate the freedom of trade, commerce and intercourse. If that view is taken then every law shall become contrary to Article 301 and unless saved by Articles 302 to 307. To keep away from such situations Supreme Court in Atiabari Tea Co. v. state of Assam[[i]], declared that only the laws that directly or immediately puts restriction on freedom of trade and commerce will be covered under Article 301 and laws which affects directly the freedom which is guaranteed in this article will not come under the purview of Article 301.

In Article 301 the word intercourse has a wide meaning. All such intercourse which will not be included in trade and commerce will be covered by the word intercourse. Thus, the movement of non-commercial nature will be covered under intercourse as it was held in Chobe v. Palnitkar[[ii]]. In Article 301 the word free doesn’t mean an absolute freedom.

In Automobile Transport Ltd. v. State of Taj[[iii]]., it has been held that the rules which ease the freedom of trade, commerce and also compensatory taxes are also saved from the reach of Article 301.

The Right to practice any profession, trade, occupation or business are Fundamental Rights guaranteed under Article 19(1)(g) to the citizen. The supreme court held that the Articles 301 and 304 are not violated in the case of State of Bihar v. Harihar Prasad Debuka[[iv]] wherein the notification issued by Bihar from other states was a regulatory measure and does not violate Articles 301 and 304 of the Constitution. The court also laid down the following principles:-

1. That the both inter-state and intra-state trade must be assured under Article 301.

2. Moment of goods and persons should be included under trade, commerce and intercourse.

3. The freedom is not from all tax laws.

4. If the free flow of trade are directly and immediately impede by those laws are then void.

5. Laws which are merely regulatory or compensatory in nature and facilitate the freedom of trade are outside the scope of article 301.


1. Parliamentary power to regulate trade, commerce in the public interest:- Parliament under Article 301 has powers to impose restriction on the freedom of trade, commerce and intercourse between one state and another, as required in the public interest. But under Article 303 the Constitution limits the ambit of Article 302. Article 303(1) provides that parliament shall have no powers to make any law that gives preference to one state over another state. But under Clause(2)of this Article provides that the parliament may make such a law, provision or regulation for the purpose of dealing with a situation that arises from scarcity of good in any part of India[[v]].

2. State power to regulate trade and commerce: Article 304(a) empowers the state to impose any tax on goods imported from another state, if similar goods are subject to tax in the state. This clause is included to remove discrimination between goods imported and the goods produced in the State. In the case of State of M. P. V. Bhailal Bhai[[vi]]; M/S. Western electronic V. State of Maharashtra[[vii]], the question was upon a law that had been passed to impose sales tax on imported tobacco from other states but not on locally produced tobacco. The Court declared that the taxes imposed are invalid and discriminatory.

Article 304 Clause (2) provides that the state is authorized to impose reasonable restriction on freedom of trade, commerce and intercourse in public interest. Any bill for this purpose cannot be introduced in legislature of a state without the prior permission of the President. In Kalyani Stores v. State of Orissa[[viii],]it has been held by the Supreme Court that if similar goods are produced within the state then state legislature will be enabled by the Article 304 to impose taxes on such goods of the same nature that are imported from other states. In State of Karnataka v. M/S Hansa Corporation [[ix]] it has been held that a subsequent assent of president is also sufficient to enable such taxes on goods from other States.

3. Saving of existing law-Article 305 saves the already existing laws at the time of commencement of the Constitution and also provides State monopolies in any trade except in so far as the president may by order otherwise direct[[x]].


According to Article 307, the Parliament is authorized to appoint by law an Authority for carrying out the purpose of Articles 301 to 304 and may confer on that Authority such powers and duties as it thinks necessary.


Under Part XIII of the Indian Constitution the provisions related to Freedom of Trade, commerce and Intercourse in India are provided. Freedom of trade which has been provided by the Indian Constitution is not absolute. Article 302 to 305 contains restrictions which are being imposed on freedom of trade to ensure that trade must be carried out throughout the state and county in a lawful manner. With the help of these provisions there will be no unreasonable interference based on the geographical barriers in conduction of the activities of trade and commerce.

[i] A.I.R. 1951 S.C. 232. [ii]A.I.R. 1954 Hyd. 207. [iii] A.I.R. 1962 S.C. 1906. [iv](1989) SCC 192. [v] Chauhan Arun; Discuss the scope and extent of the freedom of trade, commerce and intercourse under the Constitution (2020). [vi] AIR 1964 SC 1006. [vii] AIR1989 SC 621. [viii] (AIR 1966 SC 1686). [ix] (2982) AIR SC 463. [[x]] Pandey Dr. J.N; Constitutional Law Of India; 55th edition 2018.



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