Cross-LoC trade constitutes intra-state trade, observes J&K High Court

The Court was hearing writ petitions filed by traders who had engaged in barter/supply transactions with people across the LoC during 2017-2019.

The petitioners have challenged the show-cause notices issued by tax authorities demanding GST, challenging the territorial and supply classification on various grounds.

A division bench comprising Justice Sanjeev Kumar and Justice Sanjay Parihar dismissed the batch of petitions challenging the show-cause notices issued under the GST Act in relation to the now-barred cross-LoC trade.

"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 UT) 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.

“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,” the court said, while dismissing the plea filed by the petitioners.

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.