With a rejuvenating hope that the path-breaking tax reform, the Goods and Services Tax, may possibly get the nod for implementation from the start of the next financial year on April 1, 2017.
Citing its Special Constitutional position of Jammu and Kashmir, the J&K Government has asked Centre to protect the state's special taxation powers while rolling out the Goods and Services Tax (GST).
Last week, the Jammu Kashmir's Finance Minister, Mr. Haseeb A Drabu, who attended 28th meeting of all 28 Finance Minister in New Delhi clarified in the state Assembly about the reservations the Jammu Kashmir has on the General Sales Taxes regime.
Drabu refuted the reports published in various media that J&K state has not much objections to the new taxes regime being implemented by Union Government. Drabu stated in the house that the current GST has not provided for safeguards for J&K. He has sought a “special committee to chalk out modalities as how J&K can recover taxes under GST.
The state Government's concern that the bill circulated by the Union Ministry is missing safe guards for J&K's special status, could be considered vague on the ground that how something that's good for the whole nation is “not really good” for J&K.
State Finance Minister Haseeb Drabu's allegation on previous NC-Cong Government for ignoring the GST consideration during their rule may echo with the same inaction by the present regime if not dealt with seriousness.
As the Empowered Committee in Kolkata has been informed by J&K Finance Minister Drabu for constituting a sub-group to understand J&K's concerns on the special tax powers that it enjoys, the state's taxes will maintain the status quo unless the GST bill with or without modification is ratified by the state Assembly.
However, recommendations of the six-member official panel headed by the then Advocate General Mr. Ishtyaq Qadri constituted in October 2013 by NC-led coalition government to study he implications of GST on taxation autonomy of J&K state were not made public yet.
While the state has to gain much on account of GST being a major importing state and the assurance by the centre to compensate such state with major share from the central pool, Jammu Kashmir's poltical establishment is more worried of their residual powers which they draw from the special status state in making own laws on taxation. If studied in depth, one finds the state's objection more political than the economical.
Deliberations in Kolkata Meet on Tuesday give ample reason that the stalemate caused by the rigidity of the Congress is about to end. In fact, representatives of the Congress-ruled States seemed in no mood to further delay the revolutionary reform. It was courageous of them to give their nod despite the inexplicable stubbornness of the party high command which offered ever new excuses to impede the passage of the GST legislation.
Congress has been expressing concern for incorporating of a firm cap on the GST rate in the constitutional amendment bill itself at 18 per cent. This was irrational and retrograde. Tying future governments hand and foot on the tax rate ignores all manner of national and global contingencies. Only economic factors can determine the tax rate at any given time; it cannot be decided before hand. It is no commonsense to rule out all such contingencies which may require a change in the rate, regardless of whether it is to lower it or to hike it further. A conference of empowered group of State finance ministers is scheduled next month to resolve the pending issues.
The Centre has already reduced the threshold limit from the earlier proposed Rs. 25 lakh revenue per annum to fall in the GST net, it is now proposed to be Rs. 10 lakhs. However, small traders with annual revenue of less than Rs.50 lakhs will have the option of paying a nominal tax of one percent to reduce their compliance burden. GST is to be levied on the supply of goods and services on the transaction value and not on the actual maximum retail price after discounts offered by manufacturer and retailers.
It is presumed that the committee on GST design had “recognized” constitutional position of J&K on this count and had recommended that in clause 4 of Article 279–A, a special scheme for Northern Eastern State and Jammu and Kashmir would be allowed. Our political parties and the civil society must engage this issue with prudence and farsightedness and with prejudiced eye for the fear of losing it monopoly politics.
