The Supreme Court has recently reaffirmed the constitutional principle that States cannot use taxation as a tool to discriminate against goods imported from other States. The judgment highlights the importance of ensuring free trade, commerce, and intercourse across India, as guaranteed under Article 301 of the Constitution.
Court’s Observation
The Court made it clear that taxation powers conferred upon States under the Constitution are not absolute. They are subject to the fundamental restriction that such powers cannot be exercised in a manner that creates trade barriers or unfairly disadvantages goods from other States.
The ruling emphasized that while States may levy taxes for revenue purposes, such taxation must be non-discriminatory and uniformly applicable. Any attempt to favor local goods at the cost of imported goods from other States would be unconstitutional.
Legal Principle
- Article 301 of the Constitution ensures freedom of trade, commerce, and intercourse throughout the territory of India.
- Article 304(a) explicitly prohibits States from imposing discriminatory taxes on goods imported from other States.
- Taxation that protects local industry by penalizing outside goods amounts to a restriction on free trade.
Significance of the Judgment
This decision strengthens the constitutional vision of “One Nation, One Market”, ensuring that economic unity is preserved across the country. It also sends a strong message that taxation should be a revenue-generating measure and not a weapon of economic protectionism by individual States.
Conclusion
The Supreme Court’s ruling reaffirms the principle that taxation powers must be exercised within constitutional limits. States cannot enact or enforce tax policies that create artificial barriers to trade or discriminate against goods imported from other States. The judgment thus upholds the spirit of economic federalism while protecting the seamless flow of trade across India.
