In Jammu and Kashmir, the GST debate raises concerns about the dilution of Article 370

“Article 370 is safe and modalities are safe. You should recognise that we are setting a precedent. If anything it is my understanding that the Union is sharing sovereignty with the states, in the taxation space,” Jammu and Kashmir Finance Minister Haseeb Drabu reportedly told businessmen on Monday evening, as the government tried to build support for implementing the Goods and Services Tax in the state.

The ruling People’s Democratic Party, in alliance with the Bharatiya Janata Party in the state, has also tried to reach out to opposition parties. A lengthy all party meeting on Tuesday cut no ice. It remains to be seen whether a special session of the state assembly, scheduled on June 17, fares better.

Despite the state government’s attempt to project the GST as an empowering change, both the state opposition and traders’ and manufacturers’ bodies are apprehensive. In the sensitive state, shaken by anti-government protests over the last year, there is fear that it will erode the autonomies granted under Article 370.

“The government of India says one tax, one nation, we don’t believe in that,” said Mohammad Yaseen Khan, president of the Jammu and Kashmir Traders and Manufacturers Association. “This is disputed territory. Implementing GST will remove our economic independence. Maybe there is nothing wrong with GST in other states. For me, it is a different ball game. I don’t believe what they believe.”

The National Conference’s objections also hinged on questions of economic independence. “Taxation is a state subject. If the power of taxation moves to the Centre, it is a dilution of autonomy. The form of taxation is not a problem, the power of taxation remaining with the state is a core issue,” said Junaid Mattu, spokesperson of the National Conference.

‘Fiscal autonomy’

Article 370, laid down in 1949, limited the jurisdiction of the Centre in the state of Jammu and Kashmir. First, so far as the state was concerned, the Centre could only pass laws that dealt with defence, external affairs and communications. Second, laws by the Centre would only be applicable to Jammu and Kashmir if the state assembly passed a resolution approving them. Most of the laws in the state flowed from a separate Jammu and Kashmir Constitution.

The Central GST and Integrated GST laws passed by the Centre do not apply to Jammu and Kashmir as of now. The state assembly will have to pass a bill saying both the Central and Integrated GST will apply in the state. Then, it will have to pass its own GST bill, like other states. Service taxes imposed by the Centre across the country since 1994 do not apply to Jammu and Kashmir either.

The GST regime, which will usher in a single indirect tax for the supply of goods and service, from the consumer to the manufacturer, is to make the country “one unified common market”. It merges several Central and state levies into a single tax.

This is where the National Conference objects. “The (Central) government wants a one tax regime,” said National Conference legislator Ali Mohammad Sagar. “And it (the Bharatiya Janata Party) is part of the ruling alliance here. The National Conference is very firm about this: if it attacks fiscal autonomy, we will oppose it.”

For Mattu, “a simple mirror bill” reflecting the Central law would not address the unique conditions of government in the state. “This is a complex situation, it needs to be handled differently,” he said.

Both party members demanded that the state government make its position clear and keep opposition parties in the loop about the details of the proposed bill. But the all party meeting was greeted coolly by the National Conference.

“We don’t want to sound sceptical but the fact is we asked the state government to have an all party meeting and defer the special session, but they have not done that,” Mattu said. “This is a mere formality. We expected that they willl make a proposal about how to handle it but the state government is clueless.”

The other blow to autonomy, according to the National Conference, is the extension of Constitutional Amendment 101 to Jammu and Kashmir. It was passed by Parliament last year in order to usher in the new tax regime.

Drabu had argued that the state’s legislative powers of taxation, drawn from the Jammu and Kashmir Constitution, would remain unchanged. He also pointed out on Monday that this was the first time a Constitutional amendment would be debated in the state assembly. But this too, he tried to persuade audiences, would not tamper with the state’s autonomy. “States have huge power today. Our government has done nothing in the constitutional amendment which takes away the legislative powers of J&K,” he said.

‘We will be out on the streets’

The ruling coalition has the numbers to push the bills through the state assembly. In the 89 member house, the People’s Democratic Party has 28 seats and the BJP 25, besides two nominated members.

But if the state government is unable to convince various stakeholders about the benefits of the GST, it could become fresh cause for rancour in the troubled Valley. “They are here for bijli, paani, sadak (electricity, water, roads),” said Khan. “Whichever government comes to J&K, we vote for them only for that.”

Beyond that, the state government is seen as the keeper of Jammu and Kashmir’s autonomy. “You tell us how you will protect our special status, our economic independence,” Khan continued. “If you will not, we will be out on the roads, we will oppose it.”