Srinagar: Assuring that central Goods and Services Tax (GST) will be extending to Jammu and Kashmir state with “all safeguards”, J&K Finance Minister, Dr Haseeb A Drabu, on Wednesday warned of “economic chaos and crisis” if the law is not implemented forthwith.
India is changing to a new tax regime: “One Tax, One India”, from mid-night of June 30 and July Ist 2017. The union finance minister in a letter to J&K Chief Minister asked state government to implement GST or “JK industry will be at disadvantage”.
All states of Indian have extended and implemented the 101th amendment of Indian constitution regarding the GST regime.
The resistance leadership has termed the central GST law as a “plan to cripple economy of J&K”
“After the GST is in vogue,” Dr Drabu said in a discussion during live-in program ‘Good Morning J&K‘ on DD Kashir TV channel this morning, “all the trade related activity will be changed.”
The J&K government also held an All Party Meeting on June 13 wherein extension of central GST law was debated, however, the opposition parties remained adamant that implementing such a law will “erode fiscal autonomy of J&K by which the state would decide and levy taxes on its own”.
“If central GST is not extended and implemented in J&K state, there will be economic chaos and crisis,” he warned. “Trader will be eliminated.”
He explained that the GST is being implemented across India from Ist July and all the traders have been allotted a serial number. “How will trade happen if traders in J&K do not have this number,” he said, “any trade which will take place from next month will happen transparently through GST numbers. Traders and their suppliers will have transactions of goods and services through this number only.”
Dr Drabu, who has been a top economist on-board at least with fifteen multi-national companies, before he joined pro-India Peoples Democratic Party (PDP) in 2014 and won from Rajpora assembly segment later that year, said that the GST is “beneficial to the state as well as traders”.
“Traders know it very well how good is the new tax regime,” he said, “yes, the state revenue will have a benefit of Rs 1500 to Rs 2000 crore.”
However, he alleged that a “wrong perception is being created against the GST”.
“Situation is being exploited,” he said. “Till now, forty six (46) amendments in Indian constitution have been extended to the state of J&K and nobody knows about it,” he said, “but our government took an initiative and for the first time, we took any such issue to the J&K legislature for debate and wider consensus.”
The lower house of J&K legislature met on June 17 but was adjourned that day only without any debate on GST after government decided to form an All Party consultative group to evolve a wider consensus on the extension of central GST to J&K.
“A perception has been created that state’s autonomy is being breached but there is no question of breaching Article 370,” he asserted. “The J&K government is applying the 101th amendment of Indian constitution with ample safeguards.”
“We have special political position; we have a taxation system powered by Section 5 of J&K Constitution and now we will bring the amendment in Indian constitution to J&K assembly and get it passed with required safeguards,” he informed. “Our requirements have been added (to central GST law).”
He said that All Party consultative group is again meeting on June 29 in Srinagar. It is headed by PDP MP Muzaffar Hussain Baig which held its first meet on June 25 and evolved “three paths to be followed on implementation of GST in J&K”.
The NC and Congress stayed away from the meet.
He further informed that the GST council had agreed that only J&K state will have a separate appellate authority. “If there is any dispute, we will solve it through our own appellate authority.”
He also said that many states including Kerala and West Bengal had raised issues of language with regard to GST constitution. “We too have tried to make it as simple as possible.”
The Finance Minister, however, assured that the trade and industry will be given protection “in any case”. “We are continuing with tax exemptions; we will take a liberal view; we will have a soft launch (of GST),” he said, “we will take on board everyone, and we are trying it for last some months.”
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But, Dr Drabu, added, “how will trade happen, a common citizen needs to think over it.”
“There will be double tax on the consumers of J&K if GST is not implemented; J&K is a consumer state and the consumer will have to pay tax to GST council as well as to J&K state government (if the central GST law is not implemented).”
He feared that there will be shortage of essentials like salt, oil and other things “because traders from mainland India will be unable to supply goods to traders of J&K”.
Dr Drabu also said that with GST implementation, “the governments will easily come to know about the income of households”.
“Earlier there would be mis-match between sales and income taxes.” “Now, it won’t happen,” he said.
The economist turned unionist lawmaker and now J&K FinMin, Drabu, said, “it has been my aim to make trade in J&K as professional as possible.”
Dr Drabu was chairman and CEO of J&K Bank till 2009 before he put in his papers and flew to mainland India only to return in 2014.
“Traders develop a network, a business network, which is based on trust but when it breaks, it is very difficult to stitch it together,” he explained. “(J&K) traders will be taking orders but unable to execute them creating trust deficit which will be catastrophic.”
“But we will give such a model that traders will be happy,” he exclaimed.
Whether the new tax regime will help create jobs in J&K state, Drabu informed that the new law is “all about value addition”.
“When there is value addition (of products), more jobs are created,” he said, however, he added that costs of goods may escalate.
“When the system is taxation friendly; businessmen show their incomes honestly, it will help their businesses grow which essentially means they will employ more people thus helping fight the unemployment,” he said. “The GST law will create an environment for creation of jobs.”
“There is very low value addition in J&K industry,” he said, “otherwise value addition is core of the economy. The more you add to it, there will be more employment.”
He cast an example as how apple growers can add value to their product by special packing or shifting the product to juice plants before selling them in markets outside J&K.
He said that state budget needs as much transparency as possible. “I have tried it,” he said, “without casting aspersions there was huge corruption in it.”
“We are working in such a way that public debate, which will lead to public consensus, is generated on budget. Common people need to get involved in it directly so that budget formation is transformed,” he said.
“We have low expenditure on culture; but let us have safety nets in this area as we have an enlightened lot of people associated with this,” he said.
In case of subsidised items, “there will be direct beneficiaries transfer (DBT)”, he said, “it is up to consumers then whether they buy the goods or not which have subsidy.” Sugar is one such example.
“In short, corruption will perish,” he claimed.