Unit I — Federalism, Centre–State Relations & Trade

“India is a Union of States.” — Article 1

A Federation with a Unitary Bias

India is described as “quasi-federal” (K.C. Wheare): it has the federal marks — a written constitution, a division of powers (Seventh Schedule), an independent judiciary — but a strong unitary tilt, and the Union is indestructible while the States are not (Parliament can reorganise them under Art. 3).

In Simple Terms: India is a federation for normal times that turns strongly unitary in a crisis — power is shared, but the Centre holds the trump card. S.R. Bommai v. Union of India (1994) confirmed federalism is part of the basic structure, yet upheld the Centre’s strong role.

Centre–State Relations

flowchart TD
    A["Centre-State Relations"]:::root
    A --> B["Legislative (245-255)<br/>Union / State / Concurrent Lists;<br/>Union prevails on Concurrent"]:::leaf
    A --> C["Administrative (256-263)<br/>States comply with Union law;<br/>Centre may give directions"]:::leaf
    A --> D["Financial (268-293)<br/>taxes divided & shared;<br/>Finance Commission, GST Council"]:::leaf

    classDef root fill:#FFF8DC,stroke:#333,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

1. Legislative — the Seventh Schedule splits subjects into the Union, State and Concurrent Lists; on the Concurrent List, Union law prevails in case of repugnancy (Art. 254), and residuary power lies with the Centre.
2. Administrative — States must so exercise their executive power as not to impede Union law (Art. 256); the Centre may give directions and, in the extreme, invoke Art. 365.
3. Financial — taxing powers are divided and revenues shared, with the Finance Commission (Art. 280) and the GST Council keeping the fiscal partnership working.

Freedom of Trade, Commerce & Intercourse (Articles 301–307)

Article 301: “…trade, commerce and intercourse throughout the territory of India shall be free.”

Article 301 guarantees a single economic union; but the freedom is not absolute. A State may tax imported goods only if it taxes its own goods alike (no discrimination — Art. 304(a)), and may impose reasonable restrictions in the public interest with the President’s assent (Art. 304(b)). A purely compensatory charge — a toll for using a road or bridge — falls outside Art. 301 altogether.

Cases: Atiabari Tea Co. v. State of Assam (1961) — a tax that directly and immediately restricts trade offends Art. 301; Automobile Transport v. State of Rajasthan (1962) — the compensatory tax exception; Jindal Stainless v. State of Haryana (2016) — a nine-judge bench recast the doctrine.

Local Self-Government & Special Provisions

The 73rd & 74th Amendments (1992) made panchayats and municipalities permanent constitutional bodies with regular elections, reservations and their own finances. Article 370 (J&K’s special status) was rendered inoperative in 2019 — upheld by the Supreme Court in 2023 as a provision that was only ever temporary — while Articles 371-A to 371-J still give tailored protections to particular States.

✏️ Sample Solved Problem (IRAC Method)

Problem: A State levies a lower sales tax on cotton goods manufactured within the State than on cotton goods imported from other States. A trader challenges it as violating the freedom of inter-State trade. Decide.

I — Issue

Whether a tax that burdens imported goods more heavily than locally-made goods violates the freedom of trade under Articles 301 and 304(a).

R — Rule

• Article 301 guarantees free trade throughout India.
• Article 304(a) permits a State to tax imported goods only to the extent it taxes similar goods produced within the State — i.e. no discrimination between local and imported goods.

A — Analysis

The tax openly discriminates: identical cotton goods bear a lower rate if made in-State and a higher rate if imported from a sister State. That is precisely the discrimination Article 304(a) forbids — it erects a fiscal barrier at the State border and defeats the single-economic-union purpose of Article 301. The decoy is the State’s taxing power; a State may tax imports, but never on discriminatory terms favouring its own producers.

C — Conclusion

The differential tax is unconstitutional — it violates Articles 301 and 304(a) by discriminating against goods imported from other States. The trader succeeds.

📄 The full bundle (₹199) has the complete Unit I — federalism, all three Centre–State relations, the full trade-and-commerce doctrine and local government with blueprints — plus the Question Bank’s model answers to the octroi and State-property-immunity problems. Get Notes + Question Bank — ₹199