The Government of India vide Jammu and Kashmir Reorganisation Act 2019 (said Act) has reorganised the state of Jammu and Kashmir into the Union Territories of Jammu & Kashmir and Ladakh.
As per Section 4 of the said Act, the Union territory of Jammu & Kashmir shall be Union territory with its own Legislature. Now, Section 2(103) of the CGST Act, 2017 provides that, “State includes a Union territory with Legislature;”. Hence, the Union territory of Jammu & Kashmir shall have status equivalent to that of a state.
However, as per Section 2(114) of the CGST Act, “Union Territory” means (a) The Andaman and Nicobar Islands; (b) Lakshadweep; (c) Dadra and Nagar Haveli; (d) Daman and Diu; (e) Chandigarh; and (f) Other territory; Hence, Ladakh is yet to be included under the aforesaid definition. Section 3 of the said Act states that Union Territory of Ladakh shall be formed without legislature. Hence, it shall have status to that of a Union Territory.
In view thereof, Union Territory of Jammu and Kashmir shall continue to charge SGST and CGST for intra-state supplies, however for supplies made from Jammu & Kashmir to Ladakh (and vice – versa), IGST shall be charged (Section 7(1)(b) of the IGST Act). For Ladakh, there is a lack of clarity in the GST law, since Ladakh has not been included in the afore-quoted definition of Union Territory, however it is understood that it shall be duly covered under clause (f) of Section 2(119) i.e. Other Territory, therefore, it would be appropriate to charge UTGST and CGST for supplies made in Ladakh.
Further, it is relevant to note that Table 4 in the Fifth Schedule is titled as ‘STATE ACTS INCLUDING GOVERNOR’S ACTS THAT SHALL REMAIN IN FORCE IN UNION TERRITORY OF JAMMU AND KASHMIR; AND UNION TERRITORY OF LADAKH’. Under this, The Jammu and Kashmir Goods and Services Tax Act, 2017 was included within its purview. This would mean that JKGST would be squarely applicable to the UT of J&K as well as Ladakh. However, charging JKGST in the Union Territory of Ladakh will lead to legal infirmity.
Now, the Ministry of Home Affairs (Department of Jammu and Kashmir Affairs) has issued a Removal of Difficulties Order dated 30-10-2019 which seeks to remove difficulties arising in giving effect to the provisions of the Jammu and Kashmir Reorganisation Act, 2019.
Now, Section 2(7) of the said order states that:
“The Jammu and Kashmir Goods and Services Tax Act, 2017 shall be applicable to the Union Territory of Jammu and Kashmir and the Union Territory Goods and Services Tax Act, 2017 shall be applicable to the Union Territory of Ladakh.”
In view thereof, it is clear that UTGST Act shall be applicable to UT of Ladakh and the JKGST Act shall be applicable to UT of Jammu & Kashmir.
Therefore, consequent to aforesaid re-organisation and after consideration the prevailing relevant provisions under the GST law, our views are summarized as follows:
|Type of Supply||Nature of Supply||Tax to be Charged|
|Supplies made within the Union Territory of Jammu & Kashmir||Intra-state Supply||SGST & CGST|
|Supplies made within the Union Territory of Ladakh||Intra-state Supply||UTGST & CGST|
|Supplies made from the UT of Jammu & Kashmir to UT of Ladakh (and vice versa)||Inter-state Supply||IGST|
However the aforesaid view is subject to any notification issued by Central government in this regard confirming applicability of UTGST on Ladakh treating it as Union Territory.