Trade and industry in Jammu and Kashmir will take a hit as the State is unlikely to move to the Goods and Services Tax (GST) from July 1.

“There is no option for the State but to implement GST. However, it will be difficult to launch it from next month,” said Ajay Nanda, Minister of State for Finance for J&K.

Unable to reach a consensus with the Opposition, the State government has now set up an all-party committee to work out a roadmap to implement GST. “The committee will meet after Eid and decide on the modalities, including the rollout date,” Nanda told BusinessLine.

“Missing out on GST will impact the State’s trade and industry as it will make raw materials costlier while finished products will become more expensive,” he said, stressing that the State government is very keen to implement the new tax regime.

All States, barring J&K, have enacted State GST laws — or promulgated an Ordinance for the new levy as in the case of West Bengal and Kerala.

Special status

Given its special status under Article 370, J&K has to amend its own Constitution to roll out GST. A Special Session of the State Assembly called on July 17 failed to pass the Bill. Concerns had also emerged on how the new levy would impact the State’s fiscal autonomy.

Finance Minister Arun Jaitley had earlier warned that States that do not sing on to GST will not get the benefit of compensation for revenue loss for the first five years.

“If any State keeps out for a transient time, both its consumers and producers will suffer as the producers will not get input tax credits and consumers will get more expensive products than the rest of the country,” he had said after the last meeting of the GST Council on June 18.

Tax experts said that almost all manufactured items such as FMCG, consumer durables and even processed foods that are produced in other States would be costlier in J&K after July 1.

“It would have been better if J&K had come on board from July 1 as consumers in the State would benefit from GST,” said MS Mani, Senior Director, Deloitte.

Others noted that the Integrated GST (IGST) Act does not apply to the State. “It shall extend to the whole of India except the State of Jammu and Kashmir,” say the IGST Act, 2017.

“This means that the status quo on inter-State transactions will continue and no credit will be available post-GST,” said another expert, adding that as a consuming State, J&K will be at an advantage under GST and earn more revenue.

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