Jammu Kashmir’s Finance Minister Haseeb Drabu, at a lecture at Kashmir University this week has indicated that the state may not endorse and implement the new Goods and Services Tax (GST) regime that is being rolled out throughout the country soon. The Finance Minister echoed the same concerns that have been widely articulated in the state – that the bill compromises J&K’s special powers to tax both goods and services; and that under the new regime no powers would be left for the state to tax services – constituting a major surrender of a special financial power. J&K state had earlier sought incorporation of suitable provisions in the proposed Article 279-A and Article 279 B to provide safeguards to J&K’s constitutional position.
That doesn’t seem to have happened. By virtue of its own constitution, J&K has the power to tax both goods and services, while as the other states of the India have the power to tax goods only. Now, since the new GST architecture will allow the central government to also tax goods and the States to tax services concurrently, J&K’s loss is likely to be both political and financial.
J&K’s legislature has the competence to enact laws on various subjects, including those specified in list II of the schedule VII of the Constitution of India. If the new GST regime is applied to J&K without exceptions to J&K’s constitutional powers related to taxation, its special status in financial powers would be seriously compromised. It has been clear throughout the debate on GST that J&K would not get additional authority in lieu of its surrendering the exclusive authority to tax the goods.
The GST in its current form will fetch New Delhi a broader tax base in J&K, and get it more tax resources from this state. In its current form J&K will lose what it is able to collect today – both in quantitative as well as qualitative terms. Under the new tax regime the State government may even find it difficult to offer tax rebates to industry and other enterprises. Under these circumstances the state’s position is timely and appropriate.