The Constitution of India
Article 303
Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce
(1) Notwithstanding anything in 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.
(2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any 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.
Why this exists
India's Constitution-makers wanted the country to function as one unified economic space, not a patchwork of states protecting their own markets like separate countries. Article 303 was designed to prevent Parliament or State Legislatures from using trade and commerce laws to discriminate between states — for example, taxing goods from another state higher than local goods. But the framers also recognized emergencies happen, like famines or shortages, where the Union might need to direct goods preferentially to affected regions. Clause (2) carves out that narrow, declared exception.
How courts read it
The Supreme Court has read Article 303 alongside Articles 301 and 302, treating it as a check on discriminatory economic legislation rather than a total bar on all trade regulation. In cases like Atiabari Tea Co. v. State of Assam and Automobile Transport v. State of Rajasthan, the Court clarified that reasonable, non-discriminatory regulatory or compensatory taxes (like fees for using roads) don't violate this Article, but hidden protectionism disguised as regulation does. Courts have emphasized that clause (2)'s scarcity exception must be expressly declared in the law itself, not just argued in court later.
Common misconceptions
- Myth: Article 303 means the government can never regulate trade between states.
Fact: It only bans unfair discrimination or preference between states using trade-and-commerce laws; reasonable, non-discriminatory regulation (like uniform taxes for road use) is still allowed, as courts have clarified. - Myth: Any law citing 'public interest' can create trade preferences between states.
Fact: Only Parliament — not State Legislatures — can create such preferences, and only through a law that expressly declares it's addressing a scarcity of goods.