Though the state government has of late raised its pitch with regard to New Delhi’s proposed uniform Goods and Services Tax (GST) and asked for safeguards to the special status of Jammu and Kashmir guaranteed under Article 370, it has completely ignored a second, and equally important, impact the state will have to bear if the new tax regime is implemented. Besides further erosion of what is left of its autonomy, the state will also lose the authority to tax services, which it is empowered to in the present scheme, unlike any other state in India.
The tax imposed on a majority of services across India is one of the biggest contributors to the Government of India’s revenue, from which all states get a share. But for Jammu and Kashmir there is no share from the 12 per cent Government of India services tax because no service provider in the state is taxed by the GoI. Rather, it is the state government which is authorized to tax any or all services. But, despite this authority, the state government has failed to cash in on the opportunity to provide a sound revenue base for Jammu and Kashmir.
Besides further erosion of what is left of its autonomy, the state will also lose the authority to tax services, which it is empowered to in the present scheme, unlike any other state in India.
While across India there is a negative list of services (some essential services) that are exempt from the tax, the rest have to pay. In Jammu and Kashmir, there is a positive list of services, meaning that very few services, like electricity, are taxed, while a majority is exempt.
In such a situation, a majority of service-providers, particularly private ones who make fortunes from the state, don’t even pay peanuts in terms of tax. For example, cellular phone companies, which generate approximately Rs 2,000 crore annual revenue from the state, don’t contribute a single penny to the state exchequer, as the Jammu and Kashmir government does not charge them any services tax. In New Delhi, or any other state, these companies pay 12.38 percent as services tax. Estimates show that the state loses Rs 240 crore annually from mobile phone companies alone.
Given such huge losses due to unnecessary rebates, and the government’s inability to take the right decisions, the people of the state are entitled to know why J&K would surrender its authority to tax services by implementing the GST in its present form. What are the compulsions which force the J&K government to take such a decision in a hurried and hushed manner without informing its people?
Via Pause on GST.