Sunil SharmaThe introduction of Jammu & Kashmir Reorganization Act, 2019 has led to the bifurcation of State of Jammu & Kashmir into two Union Territories namely the Union Territory of Jammu & Kashmir & the Union Territory of Ladakh necessitating the numerous changes both Legislative as well as Administrative. The Re-organization is effective from 31st October 2019. After the re-organization, at present, there is uncertainty looming large over every citizen coupled with a sense of fear. In such a scenario, the business community is also no exception. Apart from other changes which are going to affect our lives, directly or indirectly, one are of change which requires urgent attention is the Legislative changes under State Goods & services Tax Acts, 2019. Till then the confusion in absence of clarifications, is going to cause distress amd discomfiture among the business community. As we are here primarily concerned with the changes under Goods & Services Tax Acts, 2019, the President of India through the Ministry of Home Affairs, Department of Jammu & Kashmir Affairs on 30.10.2019 has notified the Jammu and Kashmir Re-organization (Removal of Difficulties) Order, 2019, under which vide Para 7 of the Order, the following has been provided in respect of Goods & services Tax (GST): In the Union Territory of Jammu & Kashmir, The Jammu & Kashmir Goods and Services Tax Act, 2017 will be applicable for the levy of State GST in respect of transactions taken place therein. In the Union Territory of Ladakh, the Union Territory Goods and Services Tax Act, 2017 will be applicable. Thus, in respect of the applicability of the Goods & Services Tax Acts, the situation stands clarified, but inspite of that, many difficulties and confusions are quite worrying and troubling. Some of the difficulties as being visualised are being discussed. Since Removal of Difficulties Order, 2019 has ordained the application of State GST in the Union Territory of Jammu & Kashmir and the UT GST in the Union Territory of Ladakh, the State/UT Codes have not been clarified as per the Legislative Scheme of the GST Acts. So far as we can understand, the State/UT code of Union Territory of Jammu & Kashmir may not going to be changed and the Code-01 may be retained. However, in respect of the State/UT Code of Union Territory of Ladakh, many difficulties are bound to be confronted by the business community for their business transactions as the traders doing business in the Union Territory of Ladakh cannot do business with Code-01. First of all, fresh registration in the Union Territory of Ladakh as a new cannot be sought as a new State/UT Code separate from Union Territory of J&K has not been allotted to Ladakh. Thus, fresh registrations under UT of Ladakh is not possible till Legislative enactments allowing GSTN Network changes are notified and implemented. As we understand that Removal of Difficulties Order mandates the UTGST for UT of Ladakh, the sales invoices for local supplies are only under UTGST Act and CGST Act. But while filing the returns under GST Acts in GSTR-3B and GSTR-1, pre Code changes period is going to throw many challenges. Though the inter-state supplies from UT of Ladakh is going to be minimal, even if any trader is going to try the same, he shall be visited with innumerable hurdles to accomplish the same as with State/UT Code (01), interstate supplies cannot be made from UT of Ladakh since the Code is destined to be changed. On administrative side, during pre-bifurcation period, Leh, Kargil & Ladakh were administered for local taxes from Kashmir. Now, as two UTs have been created, whether Ladakh is going to have a separate full GST Office, both UTGST and CGST, having different Commissioners, Additional Commissioners, Asstt Commissioners, Deputy Commissioners of UT of Ladakh or shall be controlled by the offices of the UT of J&K. Many other issues concerning Refunds, Appeals and cancellation of Registrations, core-amendments requiring administrative approvals are bound to perplex the dealers in coming days. Many of such events may cross deadlines and be barred by limitation under the Acts. Since the formation of two UTs, as two separate GST territories have been created post 30-10-2019, any transaction between two UTs are inter-state transactions covered by Integrated Goods and Services Tax Act, 2017, (IGST Act) requiring IGST to be paid & deposited. But since both the UTs have same Code-01, the Interstate B2B transactions cannot be reflected / uploaded on the GSTIN portal as portal shall not allow same Code-01 to treat the transaction as Inter-state. Similarly, B2C transactions also shall not be allowed by the GSTIN network as there is no UT option with UT of Ladakh. So, both the cases of B2B and B2C transaction inter-se, the transaction cannot be uploaded as interstate transactions which shall ultimately result in late payment of taxes and levy of late fee and demand of interest, which shall again start a spiral of complexities and confusions. Whether, the threshold limit for both the UTs are going to be changed / reduced more particularly for the UT of Ladakh as the business activity is reduced to a few months in Ladakh region. Whether, the Industrial Incentives under GST previously granted in the form of Budgetary support for the combined region of J&K are going to be continued to the UT of Ladakh and UT of J&K, since economy of both the regions is primarily dependent on the external investment. Whether any Notification issued by the Heads of GST deptts, shall apply to the UT of Ladakh also, which shall create confusions as these two are now two different GST territories having separate Lt. Governors and administrative set-ups. A dealer having registered Office in UT of Ladakh and a branch office in UT of J&K having same GSTIN is required to seek new Registration under UT of J&K. Moreover, if a dealer is having places of business across the State of J&K and currently having GSTIN starting with 01 State code, will he automatically be allotted with 2 GSTIN – one for UT of J&K and one for UT of Ladakh? Or, he will have to specifically apply for registration in the two UTs afresh? Or, he can continue with the existing GSTIN in the UT of J&K and will have to apply for a GSTIN in the UT of Ladakh afresh. The accumulated balance of input tax credit and cash as available with the dealer as on the appointed date shall continue to be under constant confusion as to whether such balances will be available for offsetting the liability in the new UT of J&K or be proportioned in a given ratio between two new UTs. In case of sales returns of the goods/services between the two UTs, the State/UT codes is a major challenge. If the goods are received in pre Code change period containing CGST & SGST taxes and are returned in post Code change period, having IGST credit, due to in-built validation in the GSTIN network, the GSTIN will certainly not accept such credit Notes. Even in cases of transactions between UT of Ladakh & other States/UTs of India, supplies received before 31.10.2019 and returned after 31.10.2019 are going to pose a major challenge to the dealers as well as Government/GSTIN. Thus, intra-state supplies before 31.10.2019 becoming inter-state supplies after 31.10.2019 between the two UTs and inter-state supplies with other States need a clarification on priority basis. The fate of stock in transit as on the appointed date is another point of dispute and will give additional headaches to the stake holders. The stock/supplies starting before 31.10.2019 with 01 codes and reaching after 31.10.2019 with another code may deny the input credit of IGST on the strength on tax Invoice. How the credit of Input be apportioned between two UTs is yet to be clarified. In terms of filing returns under GST Acts, since the appointed date is 31.10.2019, the returns are going to be filed after keeping in view the appointed date, as the change in the period is during the continuance of month October (i.e the one return filing period). It seems that more than one return is required to be filed for the same period of month of October. Similarly, for confusions regarding filing of returns including Annual return, the dealers having offices in both the UTs shall be facing herculean task. A conclusion of the above discussion shall clearly establish that there is chaos and confusion in the minds of the dealers of both the UTs and other States of India. Unless all the clarifications are provided, in-built, as early as possible, the dealers shall continue to get nightmares of complexities and confusions. Ideally, all these clarifications should have come before the appointed date, however, the Govt is still expected to come out with the clarifications to promote the Ease of doing business in true letter and spirit. Early response from Govt shall be highly appreciated as the dealers and service provider software packages like ERP, Tally, Busy and numerous others are also going to take time to update the changes.
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