Dilly-dallying on reform will result in loss to J&K: Jaitley

FINANCE MINISTER ARUN JAITLEY SAID THE PRICES OF GOODS IN J&K WILL INCREASE IF IT DECIDED TO STAY OUT OF GST NET

as the Goods and Services Tax (GST) comes into force on Saturday, Jammu and Kashmir is yet to introduce the new tax structure as the government is still in the process of discussing the issue at various levels, including the opposition parties, to build a consensus.

Finance ministry officials said the state’s move to not introduce the reform could become a political embarrassment for the NDA government and the state will have to face major financial loss. Political pundits, however, hoped the state will implement GST before the midnight of June 30, when it is rolled out by President Pranab Mukherjee and Prime Minister Narendra Modi.

“In case, it does not come on board, J&K may not be able to sell its products to other states and this will create problems for the people of the state,” said Navin Kumar, chairperson of GST Network.

Analysts said goods, especially handicraft items, being sourced from J&K will be difficult to get outside the state.

Finance minister Arun Jaitley also said the prices of goods in the state will increase if it decided to stay out of the GST net.

He said any delay in introducing the reform will be a disadvantage for both the consumers and the industry.

J&K’s finance minister Haseeb A Drabu said the government will factor in constitutional, legislative, administrative and institutional issues distinct to the state while implementing the GST.

Drabu also said non-implementation of GST would lead to complete chaos with traders and businessmen being hit the worst and ultimately it would lead to acute scarcity of consumer goods in the state.

Unlike other states, it would take a legislative amendment to adopt GST in the state.

While the government claims the GST would integrate the economy of the state with that of mainstream India, significantly benefitting it in the process, opposition parties and traders fear its implementation will compromise the fiscal autonomy and special status of the state.

Traders have threatened to embark on a massive agitation if the tax regime is forced on them, and the National Conference has advised the government to desist from implementing something that would have “irreversible ramifications on the state’s fiscal autonomy”. For the first time, consumers will get to know the actual amount of taxes they are paying for goods and services in the form of a single GST rate that will be split between central and state governments.

While the effort has been to keep GST rates as close as possible to the current tax burden on goods and services and make the transition revenue neutral, the effective tax on individual items is likely to move up or down.

The tax burden for Small and Medium Enterprises (SMEs) is set to go up. So far, this segment of the economy with annual sales up to Rs 1.5 crore enjoyed exemption from central excise duty and were paying only state-level taxes such as VAT.

There is no more excise duty exemption for setting up production units in the North East. Businesses will have to make investment decisions based on sound economics rather than tax arbitrage.

GST will make businesses take another look at the location of their warehouses and movement of goods from state to state till the final consumer.