FM Jaitley tells J&K CM Mufti to implement GST from July 1, cites adverse impacts

Arun Jaitley listed out the disadvantages of J&K not introducing GST, saying it may lead to adverse impact of a general increase in prices of all goods being purchased from other states along with an increase in the price of all goods being sold from the state.

By: ENS Economic Bureau | New Delhi | Published: June 27, 2017 2:31 am
finance minister, arun jaitley, indian express Union minister Arun Jaitley (Express photo by Prem Nath Pandey. Files)

Finance Minister Arun Jaitley has written to Jammu & Kashmir’s chief minister Mehbooba Mufti urging her to ensure rollout of Goods and Services Tax (GST) in the state from July 1. Citing price rise and “adverse impact” to local industry in J&K in case of a deferment of GST rollout, Jaitley has urged Mufti to send the concurrence of the state on the GST’s Constitution (One Hundred and First Amendment) Act, 2016, for the approval of the President. He urged the CM to take “all necessary steps” to introduce GST in the state on July 1.

“As per Article 370 of the Constitution, amendments made in Constitution of India are applicable to the State of Jammu and Kashmir with the concurrence of the Government of the State, as the President may by order specify. He (Jaitley) urged the Chief Minister to send the concurrence of the State, with any modifications as considered necessary keeping in view the special constitutional position of the State of Jammu and Kashmir, on the Constitution (One Hundred and First Amendment) Act, 2016 for the order of the President,” a finance ministry statement about the letter written by Jaitley said.

All states, except Jammu & Kashmir, have already cleared the State GST (SGST) Bill, a necessary step to roll out the indirect tax regime in all states and Union territories from July 1. Two Opposition-ruled states of Kerala and West Bengal had issued an ordinance to approve the SGST Act, while all other states and UTs passed it in their respective legislative Assemblies.

Jaitley listed out the disadvantages of J&K not introducing GST from July 1, saying it may lead to adverse impact of a general increase in prices of all goods being purchased from other states along with an increase in the price of all goods being sold from J&K to other states, which shall have an “adverse impact on domestic industry in the state”.

He said since Integrated GST (IGST) will be levied on all inter-state supplies of goods and services, credit for goods purchased in one state can be claimed in the state where it is sold.

However, if J&K does not join GST on July 1, 2017, for all purchases made by the state from other states after July 1, the dealer shall not be able to take credit of this IGST which shall get embedded into the price of purchased good or service, leading to cascading of tax and increase in price of the said good or service for the final consumers in J&K, Jaitley wrote in the letter.

Similarly, in case of goods or services sold from Jammu and Kashmir to other states, the buyer will not be able to take credit of the local taxes paid. “This shall put the trade and industry in the state of J&K a competitive disadvantage,” he said.

The ruling Peoples Democratic Party-Bharatiya Janata Party government in J&K is facing stiff opposition from National Conference and Congress for clearing GST bills as they fear it would lead to loss of fiscal autonomy of the state.

Last week, Jaitley had said that if any state remains out from rolling out GST regime, both its traders and consumers will suffer loss and they won’t be eligible for compensation package. “Because they will not get the benefit of input tax, they will have to pay tax twice and the consumers will get materials which are costlier than the rest of the country. Also, compensation package won’t be given to states who do not implement GST,” Jaitley said.

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