Tahir Bhat

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Every time the assembly is in session, the newspapers in Jammu get gung-ho about the “contributions” that Jammu makes to the state kitty by way of taxes. It is being repeated this time, as well as newspapers, suggest 79 percent of tax revenues that came to the public kitty in last three years came from Jammu region and quite a paltry sum from Kashmir.

The fact is that this money is just a collection and not the contribution. All roads leading to Kashmir pass through Jammu, with Lakhanpur as the main gateway – the only major point where tax is collected.

In fiscal 2015-16, Commercial Tax department collected Rs 5515.96 crore as a Sales Tax / Value Added Tax, Passenger Tax and Stamps & Registration. But a regional bifurcation suggests that Rs 313378 crore of ST/VAT came from Jammu against Rs 1263.04 crore from Kashmir.

This trend was exhibited by 2016-17 and current fiscal 2017-18 as well. The collections in the last financial year 2016-17 were to the tune of Rs 6224.07 crore which included Rs 4728 crore collected from Jammu and only Rs1495 crore from Kashmir. This means Rs 2596.46 crore in the last VAT era earning came from Jammu.

VAT regime ended in September 2017, as the GST regime took over. By then, however, CT department had collected Rs 3454.08 crore of which only Rs 857.61 crore was collected from Kashmir.

The fact is that certain taxes would essentially come from Jammu. It would include Entry Tax, Excise (because Kashmir, by and larger, is a dry region), VAT and the earnings from the motor spirit and diesel. Till recently, there were two check-posts, one each at Heerpora in Shopian on the Mughal Road and another near Qazigund. In this budget Finance Minister Dr Haseeb Drabu did away with both of them. Now Lakhanpur is the only major taxing point, especially for Toll Tax as the budget has converted the state into a common market still distinct from the larger common market in which it exists.

But the question remains, why the collections at Lakhanpur are more than Kashmir, the belly of the J&K’s consumer market. Reasons are more than one.

Firstly, Jammu is the only place where all the three oil companies file their returns and manage their accounts. There is zero-earnings from Kashmir on the fuel front. (see table)

Secondly, anything and everything that reaches Leh or Srinagar have to pass through Lakhanpur where it pays most of the taxes.

Thirdly, after the turmoil in Kashmir, most of the major players in the FMCG and other retail verticals migrated to Jammu. Only two major FMCG players have their small depots in Jammu. So when they get their merchandise, the first point tax would be paid at Jammu, under VAT, and the tax part for only value addition would be paid in Srinagar.

“The fact is the tax is deposited at Jammu and not paid by Jammu,” one senior taxman told Kashmir Life. “It is an accounting issue and not the contribution as it is being said.”

“The tax on the sale of Diesel and Petrol was collected at Jammu from three Oils companies namely Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation by the Petrol Taxation Wing of the Department. The figure of revenue as such cannot be bifurcated on the regional basis,” a senior Finance Ministry official said. “Similarly, entry tax used to be collected at the entry point of the State only and cannot be bifurcated on the regional basis.”

Though the situation is anticipate remaining almost the same in the current fiscal as GST is now taking over. But the share of the market and consumption will be much clear in next financial year. It will now express itself by the managed input credit that the consumer will stake a claim for. The real change in understanding the market is about to happen.

The GST was implemented across India from July 1, 2017, and in J&K from July 8, 2017. The new tax regime is the most progressive reform in the indirect taxation system of India which has taken into its fold most of the multiple taxes levied by state and the Central Government and subsumed them into a single tax levied by both Union and the States at a uniform basis at a uniform rates, wholly run on IT backbone of Goods and Service Tax Network. By the implementation of GST, the impact of state borders has vanished all the check-posts.

VAT and Entry Tax were completed subsumed along with General Sales Tax except on IMFL, ATF and Natural Gas. The sales tax on IMFL was also abolished and an additional assessment fee has been replaced therefor through State Excise Department.

Under GST, the trade and Industry is able to take credit of any taxes paid in State of their purchase while liquidating the liabilities of taxes, which accrues to them in the State of consumption. The system of this tax has been so devised so that the dealers have a minimum interface with the taxmen and as such ushers into the era of self-policing without hassle and harassment of the Inspector Raj, a Finance Ministry response to the assembly said.

“Although some hiccups have been witnessed in the initial stages of implementation which anyway are expected while shifting to a new system but with almost 6 months into the new system, the GST regime seems to have settled down very well,” the response said.

GST subsumed most the Central and State indirect taxes like Central Excise Duty, Additional Excise Duty, Countervailing Duty, Services Tax , Central Sales Tax, Sales Tax, VAT, Entry Tax, Luxury Tax, Taxes on Lottery, Betting the Gambling, Excise Duty on Medicinal and Toiletries Preparations, Cesses and surcharges relating to supply of Goods and Services, Entertainment Tax (other than levied by local bodies).

However, the Jammu and Kashmir levies Toll under Levy of Toll Act Samvat 1995 as per the taxation powers derived from section 5 of the Constitution of Jammu and Kashmir. The implementation of GST does not come in conflict with the imposition of toll in the State as the tolls and levy of taxes on goods carried by roads have not been subsumed in the Goods and Service Tax.

“Even if we compare the legal position in other States where powers are derived from Schedule-VII (state list) to the Constitution of India, the corresponding entry at Sr. No. 56 and 59 still exist and as such the power to levy tolls and taxes on goods carried by road is available to the other States also,” a senior Finance Ministry official said.

Entry 56 & 59 of Scheduled VII list II (State List) to the Constitution of India is reproduced as under:

“56 Taxes on goods and passengers carried by road or on inland waterways.

59. Tolls.”

The official added: “The industrial sector in the State of Jammu and Kashmir is not well developed as compared to the neighbouring States and as such the manufacturing units in the state are not able to compete with the goods manufactured in the neighbouring States and need some protection so that level playing field is provided to them for sustaining competition. The levy of Toll provides the Government a useful tool to protect the local industry so that it can survive.”


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