GST for Jammu & Kashmir and Ladakh

On 5

th August 2019, the Indian Government withdrew the special status for the State of Jammu & Kashmir which was governed by Article 370 of the constitution of India. Further, the Indian Government, enacted the Jammu & Kashmir Reorganization Act, 2019 on 9th August 2019. However, the Jammu & Kashmir Reorganization Act, 2019 was made effective only on 31st October 2019. As soon as the Jammu & Kashmir Reorganization Act, 2019 was made effective, the State of Jammu & Kashmir got divided into two Union Territory, namely, Union Territory of Jammu & Kashmir and Union Territory of Ladakh. Obviously, with the division of the State of Jammu & Kashmir into two Union Territory, brought along with it lots of confusion with regard to the applicability of GST. Under the present article, we would try and understand the applicability of GST in the newly formed/bifurcated Union Territory of Jammu & Kashmir (Union Territory with legislature) and Union Territory of Ladakh (Union Territory without legislature).

Position of GST prior to 31st October 2019

As per Article 279A clause (4) sub-clause (g), the

State of Jammu & Kashmir is considered to be a special category state. Section 22 of the Central Goods and Service Tax Act, 2017 requires the taxpayer to obtain GST registration even in case of special category states on crossing the specified threshold limit. However, Explanation (iii) to Section 22 of the Central Goods and Service Act, 2017 excludes the State of Jammu & Kashmir within the term ‘Special Category States’. Thus, it can be concluded that under GST, the State of Jammu & Kashmir is not considered as ‘Special Category States’ and the normal State GST law applies to the same.

Position of GST post 31st October 2019

In order to understand the GST position post-implementation of the Jammu & Kashmir Reorganization Act, 2019, it is important to note that post 31

st October 2019 the State of Jammu & Kashmir is divided into following:

Union Territory of Jammu & Kashmir (Union Territory with legislature); and
Union Territory of Ladakh (Union Territory without legislature)

Section 2(103) of the Central Goods and Service Tax Act, 2017 defines the term ‘State’. As per the said definition, the term ‘State’ includes a Union Territory with the legislature. Reading both the above paras, it can easily be concluded that the State GST law will apply to the newly formed Union Territory of Jammu & Kashmir (Union Territory with legislature). Meaning thereby that in case of intra-state supply, the taxpayer is required to charge CGST and J&K SGST. Further, the Union Territory

GST law will apply to the newly formed Union Territory of Ladakh (Union Territory without legislature). Meaning thereby that in case of intra-state supply, the taxpayer is required to charge CGST and UTGST.

Jammu & Kashmir Re-organization (Removal of Difficulties) Order, 2019

The above-concluded position can also be reconfirmed by going through the Jammu & Kashmir Re-organization (Removal of Difficulties) Order, 2019. In order to overcome the difficulties in implementing the Jammu & Kashmir Reorganization Act, 2019, the Government also notified the Jammu & Kashmir Re-organization (Removal of Difficulties) Order, 2019. Para 7 of the Jammu & Kashmir Re-organization (Removal of Difficulties) Order, 2019 covers the point Goods and Service Tax (GST). The following can be concluded by going through the para 7:

The Jammu & Kashmir Goods and Service Tax Act, 2017 will be applicable to the newly formed Union Territory of Jammu & Kashmir; and
The Union Territory Goods and Service Tax Act, 2017 will be applicable to the newly formed Union Territory of Ladakh.

Conclusion

The following table clears up the GST position post 31

st October 2019

Situation	Applicable taxes
Inter-State Supply	IGST
Intra-State Supply within the union territory of Jammu & Kashmir	CGST and J&K SGST
Intra-State Supply within the union territory of Ladakh	CGST and UTGST

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Frequently Asked Questions

Common questions about GST for Jammu Kashmir & Ladakh.

Before the Jammu & Kashmir Reorganization Act, 2019, Jammu & Kashmir was a state with special status under Article 370 of the Indian Constitution. It was considered a special category state under Article 279A(4)(g) of the Constitution.

The confusion arose because the reorganization act divided the state of Jammu & Kashmir into two Union Territories – the Union Territory of Jammu & Kashmir (with a legislature) and the Union Territory of Ladakh (without a legislature). The applicability of GST laws needed to be clarified for these new Union Territories.

In the Union Territory of Jammu & Kashmir (with a legislature), the State GST law applies. This means that for intra-state supplies, the taxpayer must charge CGST (Central GST) and J&K SGST (Jammu & Kashmir State GST).

In the Union Territory of Ladakh (without a legislature), the Union Territory GST law applies. This means that for intra-state supplies, the taxpayer must charge CGST (Central GST) and UTGST (Union Territory GST).

For inter-state supplies involving Jammu & Kashmir or Ladakh, IGST (Integrated GST) is applicable, as is the case for other states and Union Territories.

The Jammu & Kashmir Re-organization (Removal of Difficulties) Order, 2019 was notified to overcome difficulties in implementing the Jammu & Kashmir Reorganization Act, 2019, particularly regarding the application of GST laws in the new Union Territories.

The Re-organization Order states that the Jammu & Kashmir Goods and Service Tax Act, 2017 will be applicable to the Union Territory of Jammu & Kashmir, and the Union Territory Goods and Service Tax Act, 2017 will be applicable to the Union Territory of Ladakh.

Before the reorganization act, the State of Jammu & Kashmir was not considered a 'Special Category State' under the Central Goods and Service Tax Act, 2017. The normal State GST law applied to it.

Yes, there is a difference. For inter-state supplies, IGST is applicable, as is the case for other states and Union Territories. However, for intra-state supplies, the applicable taxes differ – CGST and J&K SGST for Jammu & Kashmir, and CGST and UTGST for Ladakh.

The article does not explicitly mention the impact on GST registration requirements. However, it can be inferred that businesses in Jammu & Kashmir and Ladakh would need to follow the respective State GST or Union Territory GST laws for registration purposes, based on the clarification provided in the article.