New Delhi: The Jammu and Kashmir and Ladakh High Court has ruled that trade across the Line of Control (LoC) with Pakistan-Occupied Kashmir (PoK) qualifies as intra-state trade under the Goods and Services Tax (GST) Act, as PoK is legally considered part of the territory of the former state of Jammu & Kashmir.
The bench, comprising Justice Sanjeev Kumar and Justice Sanjay Parihar, was hearing writ petitions filed by traders who had engaged in barter and supply transactions with counterparts across the LoC during 2017-2019. The petitioners had challenged show-cause notices issued by tax authorities demanding GST, disputing the territorial and supply classification of their transactions.
The court noted, “It is not disputed that the area of the state presently under de-facto control of Pakistan is part of the territories of Jammu & Kashmir. Therefore, the location of suppliers and the place of supply of goods were within the then State of J&K (now UT), and the cross-LoC trade in question constituted intra-state trade.”
The bench dismissed the petitions, directing the traders to seek remedies available under the CGST Act of 2017 rather than approaching the court.
The petitioners had argued that trade routes such as Islamabad-Uri and Rawalakot (PoK) to Chakkan-da-Bagh (Poonch) were part of a barter system, with no currency exchange, and had treated cross-LoC trade as zero-rated sales, exempt from GST. The court, however, held that the statutory framework treats these transactions as intra-state trade, upholding the tax authorities’ classification.
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