Srinagar, Nov 28: The Jammu and Kashmir and Ladakh High Court has held that the cross Line of Control (LoC) trade between the Union Territory and Pakistan Occupied Kashmir (PoK) constitutes intra state trade under the GST Act, as PoK is legally part of the erstwhile state of Jammu and Kashmir.
The ruling came while the Court was hearing a batch of writ petitions filed by traders who had engaged in barter-based cross-LoC trade between 2017 and 2019. The petitioners challenged the show cause notices issued by tax authorities demanding GST, contesting the classification of territory and supply.
A division bench comprising Justice Sanjeev Kumar and Justice Sanjay Parihar dismissed the petitions, observing that both the suppliers and the place of supply were located within the then State of Jammu & Kashmir.
“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 cross LoC trade during the tax period was nothing but intra state trade,” the bench held.
The court added that the petitioners had an “equally efficacious remedy” under the statute and should approach the appropriate authorities under the CGST Act, 2017, instead of invoking writ jurisdiction.
Representing the traders, counsel argued that the LoC trade operating between Islamabad-Uri and Rawalakot to Chakkan-da-Bagh was strictly a barter system with no currency exchange, and was treated as a zero-rated sale by participants.
The court, however, reaffirmed that the trade fell squarely under intra-state classification and dismissed the pleas.