Dated 2019-04-23

Sleight of Hand

GST has woven J&K into the Indian economic web.

Finance Minister: Haseeb Drabu hosted the last GST meet held in Srinagar. | Photo: Aqeel

Despite vociferous opposition from public, Goods & Services Tax (GST) Act has been applied on the State of J&K. After getting concurrence from the state government, the President of India has issued an order under section 370 (1) – the constitutional (Application to J&K) amendment  order 2017 – which paved way for the application of GST to the state with effect from 7th July, 2017.

The single GST now applied on whole of India, merges & subsumes  several former taxes like central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and octroi.  The term ‘sale’ has been replaced by the word ‘supply’ in GST, which means that  even  transfer of goods from head office to branch and vice-versa or branch to branch is taxable. Being a dual type GST model, it will be administered by both the union and the state governments. Transactions made within a single state are levied with Central GST (CGST) by the central government and State GST (SGST) by the government of that state. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the central government. It is a technology-driven, most complicated piece of taxing legislations and is going to present many difficulties to an average businessman in our state.

After application of article 356 and 357, which provide for dismissal of a duly elected gov’t due to breakdown of constitutional machinery and/or law and order, and applied to J&K State in 1965 during Sadiq regime, application of GST law is one of the severest assaults on the state’s fiscal autonomy.

Finance Minister Haseeb Drabu played his role to perfection in getting the GST applied to J&K. He played the perfect host to the last GST Council meet held in Srinagar on 18th to 19th May, 2017. In an interview to Mint on the previous day, he dwelt on the significance of this meeting by calling it a step towards participating in national policy making. His enthusiasm and excitement from seeing his efforts bearing fruit can be gauged from his post-meet statement: “We are a part of the whole process and history will record it saying that the meeting was held in Srinagar, consensus was arrived at. So it makes us a part of the economic history of India, which is very important for us because I don’t think we have, or for that matter any other city in the country, had an opportunity.”

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NC bigwig and former Finance Minister of J&K, Abdul Rahim Rather, was appointed as Chairman of the GST Council. It was a masterstroke from the Indian spin-doctors to keep the Kashmiri politicians happy and obliged.


At the conclusion of the meeting, Union Finance Minster Arun Jaitley sounded his approval at J&K framing its own law on GST in view of the constitutional limitations and restrictions upon New-Delhi to apply its laws in the state. But once in Delhi, he was quick to merge the state into the overall GST scheme. Ultimately, his statement in Srinagar only proved to be a move to hoodwink the people and outsmart the resistance leadership. No wonder when GST was finally applied in the state, there was jubilation in New Delhi for this completion of weaving J&K into the Indian economic web.

In this assault on J&K’s fiscal autonomy, jointly launched by the State and the Central governments, the resistance leadership was undoubtedly caught napping. It took the issue as a simple taxing statute without much bearing on the main Kashmir issue. Either it didn’t realize the repercussions of the move or it was misguided by its own people. The business community and civil society fought it tooth and nail. Many reputed businessmen and civil society members were arrested so that their attempts to take the issue to the streets were thwarted.

In applying the taxing statutes by circumvention and the subversion of constitutional procedures, our past experience has also been bitter. To quote an instance, Gift Tax Act, a central legislation to tax gifts, was not applicable to our state for want of legislative incompetence of the Centre to apply this law here. Following its abolition at the Centre in 1997, the provisions of this act were incorporated in section 56 (2) of Income Tax Act 1961 with minor alterations and amendments here and there. Since Income Tax Act applies to the state, the gifts made in our state are now taxable via Income Tax Act. In other words, Gift Tax has been facilitated into our state through backdoor. Kashmir Chamber of Commerce & Industry (KCC&I) apprised the former Prime Minister Manmohan Singh about this brazen act of injustice and foul play through a memorandum, but he brushed it aside with that typical smile of his.

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