GST Row: A Critical Analysis Of Baig Formula



GST row is refusing to die down. The civil society and every other segment of society has refused to accept it in the present form. Their concern is genuine. The law, if applied in its present form will be a lethal  assault, ever mounted  on the fiscal and political autonomy of our state.

To find a way out, the ruling coalition of PDP & BJP has formed a consultative committee  on GST under the chairmanship of Muzaffar Beigh, MP & former finance Minster of the State. To allay the fears of people, he has suggested  insertion of a rider or a proviso  in  Article 246-A of the Constitution of India stating  that the constitutional powers of J&K under Section 5 of the State Constitution shall remain intact so that the state government can exercise its powers on tax rates at any time. He further suggests that this  rider should be incorporated in the Presidential order which will be issued under Article 370 for extension of the 101st amendment of Constitution of India to J&K. According to him, this mechanism will allow the state to replace the GST if she finds it detrimental to her interests in future. In his opinion  a further provision should be made in the Indian Constitution that will make it mandatory on the GST Council, vested with the power to decide the tax rates, to seek prior permission of the state government on  any tax proposal, under Article 370.

Commenting on the demand of  civil society  that the State should enact its own GST Act with an enabling provision to enter the Indian GST regime, Baig says that  “It is impossible to have separate state law on GST because to enact such  law, the Centre will have to amend two chapters in its Constitution to delegate powers of taxation to the Jammu and Kashmir. It will become a huge political issue across the country. Besides, it will also entail amending Section 5 of J&K Constitution which is nearly impossible.

Now let us take his first proposal which rests heavily on inserting a rider in article 246A of the Indian constitution. If past experience is any guide, it will be wrong to rely on this proposal. How can reliance be placed  on a Govt., to uphold a small rider, when  day in & day out, the same Govt. threatens even to remove articles like  370 or article 35A. On any day, Govt. of India can remove the said rider  leaving us devastated. Simply put, we cannot afford to leave our fiscal  rights  contingent  at  the pleasure of Govt. of India.

Coming to his second proposal to enact our own GST Act with necessary safeguards, Baig states this proposal entails two amendment to the Indian constitution  which  will create huge political  problems for the BJP Govt. across the country. Here he  pleads the case of India more than his own State. He needs to be reminded that he has been elected by people of State to represent their case in Indian Parliament & not the other way round. If this proposal creates problems for ruling BJP, so be it. Let them solve this problem by explaining the correct constitutional history of State  to  their own hoi polloi  & the necessity to amend their own constitution. In the process of this explaining, even the 9 PM circus Managers may get some and reform  themselves .

Some other related issues have come to fore in this row. A  panic  has been created by some vested interests about the double taxation likely to be faced by  people in the State because of non-application of GST. To buttress their argument, these scare mongers claim that after getting goods from outside the State with GST, the local dealers will have to recover it from consumers & also apply VAT on such a sale. Hence the double taxation.                                                                                   This  claim is  totally unfounded. The local dealers have not to apply any VAT on local sales. Let it be said that  VAT is dead  in whole of India and also in Kashmir. The only difference is that while in India, the dead body of VAT has been buried, in our state, it is yet to be buried. But dead bodies whether buried or not do not walk, don’t talk & don’t claim any right of a living person. Once the State Govt. has issued Registration numbers under GST (without any GST law existing on the subject), it will be barred from enforcing VAT under  the ‘doctrine of estoppel’. I am sure, my this opinion can be ably defended by our competent lawyers in a court of law, if & when a need arises.

Yet another issue has been raised by our few friends in Jammu. It appears that they want to get integrated in central GST  regime without any regard to State’s special status. I will like to remind these friends that only a few months back, when Govt. wanted to allot drug dispensing units at some vintage points in Jammu to non state subjects, they raised a hue & cry  to deny them the allotment under the umbrella  of Article 370. If the special status was sacred to them then, it should also be dear to them now.

Lastly a word for the local business community. When the dust over GST settles down, they get a unique opportunity in diversifying their sources of procurement & trade centers. Previously such procurement was costly because of inadmissibility of  2%CST, levied in the course of inter-state trade & commerce, as input credit. With the GST regime in force, this position will change resulting in  other sources of supply also becoming competitive. Let them explore these opportunities.

(The author is a practicing chartered Accountant. Feed back at [email protected])


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