GST Impact on Reorganisation of Jammu and Kashmir

Our nation witnessed a drastic change on 1^st July, 2017 when Goods and Services Tax was implemented. However, the same was not applicable to the State of Jammu and Kashmir with effect from 1^st July, 2017. The State of Jammu and Kashmir adopted GST on 7^th July, 2017 and accordingly Goods and Services Tax was implemented in Jammu and Kashmir with effect from 8^th July, 2017.

The State of Jammu and Kashmir was considered to be a special category state as per sub-clause (g) of clause (4) of Article 279A of the Constitution. However, on implementation of the Central Goods and Services Tax (Extension to Jammu and Kashmir) Act, 2017, the State was considered as exception to the list of special category states. (Explanation (iii) to section 22 of the Central Goods and Services Tax Act, 2017)

Till 5^th August, 2019, the State of Jammu and Kashmir was given a special status vide Article 35A and Article 370 of the Constitution of India. However, the Government of India abolished the Article 370 with effect from 5^th August, 2019. Accordingly, the special status of the State was withdrawn.

Further, on 9^th August, 2019 the Government of India also enacted the Jammu and Kashmir Reorganisation Act, 2019 resulting into the bifurcation of the State of Jammu and Kashmir into two union territories namely Jammu and Kashmir (UT with legislature) and Ladakh (UT without legislature). This act shall be effective with effect from 31^st October, 2019. It means, Jammu and Kashmir shall cease to be a state with effect from 31^st October, 2019 and shall be bifurcated into the said Union Territories.

The reorganisation of Jammu and Kashmir has led to lot of confusions and speculations amongst the people with respect to the applicability of Goods and Services Tax to the State. The confusions are with regards to applicability of various GST acts to the UTs after the reorganisation of the State.

According to section 2(103) of the Central Goods and Services Tax Act, 2017, a Union Territory with legislature is also considered as a State. Consequently, the UT of Jammu and Kashmir shall have a State GST Law and the UT of Ladakh shall come under the purview of Union Territory GST Law. But the question is what shall be the status of applicability of the same.

The Jammu and Kashmir Reorganisation Act, 2019 clears all the confusion with regards to applicability of GST Laws to the State post its reorganisation. The Fifth Schedule to the Act mentions the various central laws applicable to the State and the status of state laws as applicable to the State before the appointed date, i.e. 31^st October, 2019.

Table 4 of Fifth Schedule contains the list of the state laws that shall continue to be effective post reorganisation of the State into two union territories. The list contains the Jammu and Kashmir Goods and Services Tax Act, 2017. Accordingly, the State GST Act shall remain effective in the State till further enactment or notification or amendment to the Reorganisation Act.

To conclude, the GST laws shall remain to be effective in the State of Jammu and Kashmir post its reorganisation as they were before. So, the taxpayers shall continue to charge CGST and J&K SGST, for intrastate transaction, till further changes in law. This clears the confusion amongst the taxpayers and professionals with regards to the applicability of GST Laws upon the reorganisation of the State.

© CA. Amol Gopal Kabra