SRINAGAR: A division bench of the Jammu and Kashmir high court has stated that cross-LoC trade between Jammu and Kashmir and Pakistan-occupied Kashmir amounts to intra-state trade as PoK is part of Jammu and Kashmir.
While deciding petitions from cross-LoC traders, the HC said, “It is not disputed by learned counsel appearing on either side that the area of the state presently under de-facto control of Pakistan is part of territories of the state of Jammu & Kashmir. Therefore, in the instant case, the location of the suppliers and the place of supply of goods were within the then state of Jammu Kashmir (now Union Territory) and, therefore, the cross-LoC trade effected by petitioners during the tax period in question was nothing but intra-state trade.”
“We appreciate the fair stand taken by the learned senior counsel appearing for the petitioners despite there being contrary pleadings disputing the nature of cross-LoC trade as intra-state trade,” the division bench, comprising Justices Sanjeev Kumar and Sanjay Parihar, observed.
The petitioners had challenged show-cause notices issued to them by the Superintendent, CGST, under the Central Goods and Services Tax Act, 2017, stating that when trade was started in 2008, “intra-state sales tax was governed by the Jammu and Kashmir Value Added Taxes Act, which provided that cross-LoC trade was a zero-rated sale.”
However, in 2017, when GST was rolled out, the authorities started investigations against the petitioners to probe whether they had paid GST on their outward and inward supplies. After getting information that there were huge outward and inward supplies effected by the petitioners, show-cause notices were served on them.
The petitioners also argued that even if it was assumed that the trade was intra-state, a tax demand would be impermissible as the trade was barter trade where no money exchanged hands.
The HC said it found no merit in all these petitions and dismissed them.
In 2008 after improving relations between India and Pakistan as confidence-building measures, both govts decided to allow free cross-LoC trade between them on certain terms and conditions.
However, on April 9, 2019, the Indian govt suspended cross-LoC trade on grounds that the trade routes were being misused to funnel illegal weapons, narcotics, and fake currency.
Two steps — a cross-LoC bus service and cross-LoC trade — were seen as the two biggest CBMs between India and Pakistan. On April 7, 2005, the then prime minister, Dr Manmohan Singh, had flagged off the first cross-LoC bus service, titled Karwaan-e-Aman, or peace caravan, that connected Srinagar to Muzaffarabad. Later, cross-LoC trade, established as barter trade, began on Oct 21, 2008, on two routes — Salamabad (Uri)-Muzaffarabad and Poonch-Rawalakot. Traders on either side of the LoC were permitted to exchange 21 mutually-agreed items.
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