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GST: This State Could Face Trouble For Staying Out

After years of wait, Goods and Services Tax was made live by President Pranab Mukherjee and Prime Minister Narendra Modi at the stroke of midnight during a special session held at the Central Hall of the Parliament.

The Prime Minister hailed it as cooperative federalism but there is one state that has kept itself out of GST and may face severe economic consequences for it. Jammu & Kashmir faces the possibility of double taxation of inter-state transaction of goods going to the state since two levies — the Integrated GST (IGST) and State GST (SGST) of the originating state — will be imposed on all supplies to J&K, alongside local levies such as value added tax (VAT) and sales tax.

The impact could be worse as the traders will not be able to avail input tax credit for supplies of taxable goods and services from other states to J&K. If the state government becomes ineligible for compensation for any potential losses it may cause another concern for it.

Unlike the other states, Jammu and Kashmir need to enforce both Central GST (CGST) and SGST Act due to the special status of the state under Article 370 of the Constitution. As per Article 370 of the Constitution, the power of Parliament to legislate for J&K is restricted to defence, external affairs, communication and central elections.

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