As the new tax regime GST is all set to be rolled out next month across India, traders in Kashmir have expressed their reservations over its implementation. Traders during a meeting with the Chief Minister on Sunday categorically stated that they were against the implementation of GST in the state. Their take on the issue seems more political in nature rather than economical.
There is a general belief that implementation of GST will compromise the state’s financial autonomy. The fears expressed by the trade community are based on certain truths and half truths.
Importantly, the Chief Minister it is believed has also said that she would look into the aspect of financial autonomy of the state getting eroded by the implementation of GST.
But what can be clearly said is that most of these reservations have been allowed to crop up as the political parties in the state too have not been clear and open in their opposition on the implementation of GST in the state. Since the government too does not want to land itself in any uncomfortable position, it has decided to convene an all-party meeting on June 13.
GST is an indirect tax across India aimed to replace taxes imposed by state and central government. It was introduced as the constitution (122 amendment) Act 2016, following the passage of Constitution’s 122nd amendment bill.
New Delhi believes that introduction of GST is a step in the reform of indirect taxation and it subsumes several central and state taxes into a single tax that would mitigate the problem of double taxation.
The Union government is pressing on the state that in terms of consumer point of view, the biggest advantage would be reduction in the overall tax burden on goods, which is currently estimated at 25%-30%, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent.
It has also argued with the state that GST will incorporate various indirect taxes including central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and octroi. Other levies which are currently applicable on inter-state transportation of goods will also be done away with in GST regime.
However, Article 370 of the Constitution grants special autonomous status to the state of Jammu and Kashmir. However, the Parliament of India retains the power to make laws on defence, external affairs and communication-related matters of the state. This is one of the reasons why the service tax levied all over the India since 1994 is still not applicable in J&K. The state levies its own taxes for services provided.
The state government of J&K can still integrate its revenue with Goods and Services Tax, provided they pass two separate bills in the state assembly. The J&K Assembly will have to pass a legislation stating that the two laws viz. Central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST) are applicable to them. This approval by the state assembly will be in addition to the requirement of all states to approve the State GST law.
The GST issue is a tricky one as far as the state of Jammu and Kashmir is concerned. So the government has to deal with the issue in a most cautious manner. The issue if dealt with callousness can end up generating a major controversy which of course the people cannot afford at this juncture.