Why GST could bring another phase of unrest in Kashmir Valley

The Jammu and Kashmir government's move to implement the Goods and Service tax (GST) regime, which aims at the economic integration of the state with the Union of India, has run into rough weather.

Both the Opposition, as well as trade bodies, have accused the ruling PDP-BJP coalition of 'compromising' the state's fiscal autonomy, and warned that the Valley could slip into yet another cycle of unrest if a decision was taken without proper deliberations.

On Thursday, 29 June, an attempt by the Mehbooba Mufti-led government to take Opposition parties on board the during the meeting of the Consultative Group, failed again, with the National Conference and the Congress sticking to their stand that GST at the “cost of fiscal autonomy and special status” is unacceptable to them.

Though state finance minister Haseeb Drabu has repeatedly said that his government will ensure adequate safeguards to protect J&K's special position within the Union of India, the government's failure to explain how it was going to execute the proposal has led to the simmering anger.

Why is Kashmir opposing GST?

While the rest of the states draw power to tax under Article 246 of the Constitution of India, Jammu and Kashmir enjoys these powers from Section 5 of the Constitution of Jammu and Kashmir.

The Opposition has argued that once GST is made applicable to the state by extending the 101st Amendment Act of the Constitution of India, the state government, like in the case of other states, will have to surrender the power to tax to the Union government.

“It will be the biggest blunder since 1975, and its ramifications, both political as well as legislative, would be immense and irreparable,” said senior National Conference leader and former finance minister Abdur Rahim Rather.

According to Rather, the previous NC-Congress government had given a proposal to enable the state to have its own law on GST, which is 'implementable', and under which the state would be collecting taxes on behalf of the Centre and then providing a share to it.

“But the present dispensation is acting more loyal than the king, and wants to surrender the last vestiges of autonomy to the Centre,” Rather told Catch.

His views were echoed by state Congress president GA Mir. “Our residual powers to levy taxes will go to Parliament once GST is implemented. How can they say that Article 370 won't be affected? Let them (government) explain to us the mechanism which they plan to adopt,” he argued.

Drabu's doublespeak

The Opposition has also referred to several write-ups by Drabu from 2013, wherein he had vehemently opposed GST for J&K.

In one of the write-ups, in local daily Greater Kashmir, on 15 August 2013, Drabu had cautioned that if GST was implemented to J&K in its present shape, then neither the state legislature nor the state cabinet, let alone the finance minister, would any longer have any say to impose taxes or prevent hikes, terming it as an 'irreparable loss' to the state.

Then, after the PDP and the BJP came together in an alliance in March 2015, Drabu, as finance minister, during a 22 May 2015 lecture at Kashmir University, said the state may not endorse the new GST, as it would compromise the special powers of the state to collect taxes, and that it would be a major surrender of powers by the state.

“Either he (Drabu) was right then, or he is right now; he can't be right both times. This government is itself confused on how to protect the state's fiscal autonomy,” said independent legislator Abdul Rashid Sheikh, who had a verbal duel with BJP's Anil Sethi during the meeting, after the latter had cautioned the government to implement the Central tax law without any further delay.

Does the govt have an option?

A senior official of the state finance department said the government had no option but to become part of the GST regime. “We can try and address the apprehensions, but we can't survive as an isolated economy,” he said, adding if Jammu and Kashmir stays away, businesses will be shut and it will impact livelihood of thousands of traders and their families.

In his interaction with the media in Srinagar on Wednesday, Drabu tried to allay the apprehensions, saying instead of having a separate law – as demanded by the Opposition – J&K will have a “special GST”, which will have adequate safeguards to protect the state's unique position in the Constitution of India.

But the assurances by the government, already beleaguered by street protests, have failed to convince even the traders, who are now arguing that the new tax system will irreversibly integrate the financial system of J&K with the Union of India.

Leading trader groups in the Valley on Friday called for a state-wide shutdown on Saturday in protest against the GST extension to J&K. Civil society forum Kashmir Centre for Social and Development Studies (KCSDS) has threatened to launch a civil disobedience movement in case the government goes ahead with its plans to implement GST.

And as the deadline to extend the Constitutional Amendment 101 Act to the state expires on Friday midnight, the issue is snowballing into a major controversy.

“If the government doesn't feel the pulse on the ground and, instead, rushes to bring J&K under the new tax regime without proper deliberations, the issue will have serious ramifications. It can spark yet another civilian unrest in the Valley,” warned legislator, Ghulam Hassan Mir, who is a member of the Consultative Group on GST.