Cross-Loc Trade Subject To GST, Rules J&K High Court Cites Pok's Legal Status As Part Of India

(MENAFN- Live Mint) The Jammu & Kashmir and Ladakh High Court has said that cross-trade between the Union territory and Pakistan-Occupied Kashmir along the Line of Control (LoC) falls under the ambit of intra-state trade and are bound by the GST Act.

A bench of Justices Sanjeev Kumar and Sanjay Parihar observed that the areas presently under the de-facto control of Pakista are legally a part of the erstwhile state of Jammu and Kashmir.

The court made the observation while hearing writ petitions filed by traders who were engaged in trade with people across the LoC during 2017 to 2019, including barter and supply transactions.

In their plea, the petitioners had challenged the show-cause notices issued by tax authorities demanding GST. They challenged the territorial and supply classification on various grounds.

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The two-judge division bench at the Jammu & Kashmir and Ladakh High Court dismissed the batch of pleas that challenged the show-cause notices issued under the GST Act. Cross-LoC trade has now been barred after the 2019 Pulwama attack.

“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 affected by the petitioners during the tax period in question was nothing but an intra-state trade,” the bench said.

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The court also found that the petitioners had prima facie suppressed the material facts as they were aware of the fact that the government had not issued any specific notification under Section 11 of the CGST Act of 2017 exempting cross-LoC barter trade from tax.

“They were also aware that these supplies whether inward or outward were intra-state supplies and subject to GST in terms of section 7 of the CGST Act 2017. It was the responsibility of the petitioners to self-assess and discharge their GST liability at the time of filing GST returns properly,” the bench said.

Dismissing the batch of petitions, the court said,“In the face of availability of equally efficacious remedy provided under the statute, we are not inclined to entertain these petitions and rather would relegate the petitioners to the statutory remedies available under the CGST Act of 2017.”

Counsel for the petitioners submitted that the trade from Islamabad-Uri and from Rawalakot (PoK) to Chakkan-da-Bagh (Poonch), as mutually agreed by India and Pakistan, was a barter trade, and there was no exchange of currency.

The petitioners contended that they had treated cross-LoC trade as a zero-rated sale, attracting no sales tax.

Key Takeaways

• Cross-LoC trade is classified as intra-state trade under GST regulations.
• Traders are responsible for self-assessing their GST liabilities.
• The court emphasizes the legal status of territories under de-facto control of Pakistan as part of India.

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