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Cross-LoC trade is 'intra-state' as PoK part of J&K, rules HC

SRINAGAR: In a significant judgement, the Jammu and Kashmir and Ladakh High Court has ruled that trade conducted between Jammu and Kashmir and Pakistan-occupied Kashmir (PoK) qualifies as intra-state trade, since PoK is considered part of J&K and such trade falls within the purview of the GST Act. The ruling settles a long-pending question around the tax treatment of cross-Line of Control (LoC) barter transactions carried out during 20172018 and 20182019. Cross-LoC trade was introduced in 2008 as a confidence building measure between India and Pakistan, allowing barter exchange of goods between communities on either side of the LoC. The arrangement continued until the February 14, 2019 Pulwama attack, in which 40 CRPF personnel were killed, after which the Centre suspended the cross-LoC trade and the SrinagarMuzaffarabad bus service. The Division Bench of Justice Sanjeev Kumar and Justice Sanjay Parihar, while hearing at least 35 petitions, observed: The cross-LoC trade was essentially a barter trade where there was no exchange of currency from either side. This cross-LoC trade was between the people living across the LoC i.e., trade between two parts of the state of Jammu and Kashmir, one, the then state of Jammu and Kashmir and the other PoK. The petitioners had challenged show-cause notices issued under Section 74(1) of the CGST Act, alleging wrongful availment of exemptions. Authorities had raised GST demands on traders who participated in the barter trade. The bench clarified the statutory position, ruling, From reading of the intra-state supplies of goods and services, it is evident that where the location of supplier and the place of supplies of goods are in the same state or same Union territory, that shall be treated as intrastate supply. Reiterating the territorial position, the court added, 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 the cross-LoC trade was nothing but an intra-state trade. The court also said that the petitioners did not report these transactions despite the absence of any exemption notification. The bench reiterated that while alternative remedies do not bar maintainability of writ petitions, courts may still decline intervention. It held that show-cause notices must be adjudicated by the competent authority, and cases with final demand orders must go through the appeal route under Section 107. The petitions were dismissed as premature or covered by alternative statutory remedies, with the courts finding on the intra-state nature of the trade declared binding on authorities.

29 Nov 2025 10:26 pm