The state of Jammu and Kashmir has been enjoying Special Status due to its accession to the Union of India through the ” Instrument of Accession”.
Due to this special status of J&K, the powers of the Parliament to make laws for the state of J&K are limited. As per Article 370 of the Constitution , the power of the Indian parliament to make laws in respect of Jammu & Kashmir , shall be limited to only those matters in union list and concurrent list, which in consultation with the state government are ‘declared’ by the President as corresponding to matters specified in the “Instrument of Accession”( governing the accession of the state to the Dominion of India ) as the matters with respect to which the Dominion Legislature may make laws for that State. Thus, the Central Government cannot enforce any law on the State of Jammu and Kashmir without the approval or concurrence of the Government of the State except in the case of defence, external affairs and communications.
Even levy of Central Excise duty and Central Sales Tax was also made applicable to the State through the amending Order of 1958. Provisions of levy of service tax are not applicable to the State of Jammu & Kashmir. The state enacted its own version of the Act as ‘The Jammu and Kashmir General Sales Tax Act, 1962′ through which it has levied tax on certain services.
In view of its special constitutional position the 101st Amendment does not apply to the State of Jammu and Kashmir. The State derives its Legislative powers from section 5 of the State Constitution. On introduction of GST, States would be surrendering their exclusive authority to tax goods and in turn get additional authority to tax Services which heretofore were in the exclusive domain of Central Govt. However, the position in respect of J&K State is quite different as it is already competent to tax goods as well as services and by embracing GST it would not get any additional authority. But importantly becomes entitled to a share from the Central divisible pool. GST being a destination based tax, J&K is expected to gain under the new dispensation as a consuming State.
Thus practically without the consent of the ruling Government, Goods and Service Tax cannot be forcibly made applicable to the state as the proposed application of GST can be made applicable to State of J&K only if the same is ratified by State of J&K.