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Kashmir traders ready to 'sacrifice' their lives to oppose GST

Riyaz Wani | Updated on: 1 July 2017, 20:35 IST
(Subhendu Sarkar/LightRocket/Getty Images)

The Goods and Services Tax (GST) is an issue on which a big showdown is likely in Jammu and Kashmir. Separatist groups and traders are up in arms against its implementation, while major Opposition parties are asking the government to reveal the safeguards being instituted for the state's fiscal autonomy before they come on board.

On Saturday, several trade bodies called for a Kashmir bandh against the proposed extension of the new law to the state.

Addressing a news conference in Srinagar, Muhammad Yaseen Khan, president of the Kashmir Traders and Manufacturers Federation, said the business community was ready to face losses, but wouldn't allow the implementation of GST in its present form.

“'One India, one tax' is an idea which is unacceptable to us,” Khan said. “Even if coming in the way of GST means sacrificing our lives, we are ready for it. We won't allow any amendments to the special status of J&K.”

The bandh was successful, and reflective of the fact that the government had failed to build confidence around its bid to implement the tax law in the state.

J&K's special status

The source of the tension is familiar. Kashmir doesn't want to be a part of the integrated tax regime, as people think it compromises the state's special constitutional position under Article 370. J&K is the only state in India which can levy and collect taxes in areas where only the Central government has the authority to do so in the rest of the country. For example, J&K is the only state which can also collect service tax.

The state draws its powers to collect taxes from Section 5 of the J&K Constitution, unlike other states which derive these powers from Article 42 of the Constitution of India.

Under GST, the state will lose its right to impose its own taxes and fix the rates, the power that is seen as one of the last vestiges of drastically eroded Article 370.

On 28 June, state finance minister Haseeb Drabu, in a press conference, unsuccessfully tried to dispel the apprehensions about the law. He said there would be no compromise on the state's fiscal autonomy, and it would have a special position under the new tax regime.

“All the powers that we have will become enabling provisions under GST, and we will not be compromising on the Article 370,” Drabu said. “There will be no violation of any sort. No special position is being eroded, and no constitution is being eroded, everything will be protected.”

But Shakeel Qalander, a noted businessman, who had a discussion with Drabu on Radio Kashmir, said: “There have already been 46 amendments to Article 370, which have turned it into a shell without a seed. GST, in its current shape, will be the 47th amendment, and the last nail in the coffin of autonomy.”

Two major dimensions

The issue has assumed two major dimensions in Kashmir.

One is the absolute opposition to the law's direct extension to the state. People want proper safeguards instituted to protect the special status.

Second, the problem that the state's businesses will face in the absence of an institutional mechanism to deal with GST at the national level. The imports to the state from other states will face double taxation and shoot up the prices, more so, when the Valley produces little on its own.

But for now, this prospect doesn't bother anybody. The protection of a feature of the Valley's constitutional autonomy overrides every other consideration.

“Yes, there will be problems. But our traders can still buy goods from other parts of the country. Yes, there will be double taxation, leading to a rise in prices. But then, we can't subscribe to GST under blackmail and duress. This needs proper deliberation. GST can fundamentally alter our economic relationship with New Delhi from autonomous to integration,” said Qalander.

The question of haste

Aside from the question of autonomy, traders also mention the damaging implications of the new tax regime on the state if implemented in a hurry.

“We have 90% informal economy. We have five lakh enterprises across J&K, out of which only 80,000 are registered with commercial taxes. We have three lakh artisans; they too are not registered. We also have 4.5 lakh dependent on horticulture, again not registered. This comes to more than 10 lakh enterprises, which have to undergo registration under GST before supplying any material outside the state or before importing any goods from outside. Can it happen overnight?” asked Qalander.

He criticised Drabu for claiming that the Article 5 of the J&K Constitution will be strengthened to give the state power to opt out of GST should it not work well.

“He says Article 5 will get more powers. There is absolutely no way that can be done. All powers are vested in the GST Council. The finance minister says that in case the GST compromises our autonomy, they can opt out of the tax regime. This is rhetoric,” said Qalander. “Once they have implemented the tax law, will it be possible for them to withdraw? Do they have guts to do so? If it is so, why has no government so far opted out of even one of the 46 amendments extended to the state, when each has eroded our autonomy?”

Taking the debate forward

An article written by Justice Hasnain Masoodi in a local daily has taken the debate forward. "The state, by giving concurrence to the 101st Amendment, would lose its exclusive power to legislate with regard to indirect taxes, including sales tax and service tax, not within the purview of Union List and Concurrent List, as applicable to the state and subsumed with GST,” he wrote in the article, titled 'Lest we be misled'. "It shall also lose its exclusive power to decide on levy and collection of such taxes, on exemptions and the rate of tax.”

Justice Masoodi wrote that under the new tax regime, “the GST Council is to have exclusive power to take decision on taxes, cesses and surcharges levied by the Union, the states, and the local bodies, which may be subsumed in GST”.

Splitsville for PDP-BJP?

The discourse so generated has created deep suspicions in the public mind about the law, making it impossible for the government to build a political consensus.

The National Conference and Congress have refused to come on board, even boycotting the recent all-party meeting called to discuss it. They have asked the government to first share the proposals about the contemplated new law, to help them form their opinion.

The government, as a last resort, has called for a four-day special Assembly session from 4 July to debate the issue and get the Bill passed.

But considering the rising political rancour over the issue, with separatist groups, traders, and opposition parties bitterly opposing it, the prospect of an early resolution appear bleak.

The situation has come to a point where coalition partners PDP and BJP are even talking of the possibility of a break-up. Earlier last week, BJP leader and the deputy chief minister Nirmal Singh warned the PDP of a pull-out if the law was not implemented by 1 July, the deadline that has since passed.

On the other hand, senior PDP leader Muzaffar Hussain Baig has said that if New Delhi refuses to ensure safeguards to protect the state's fiscal autonomy and Article 370 under the new tax regime, then a separation of the alliance partners "was a possibility".

First published: 1 July 2017, 20:35 IST