The Jammu and Kashmir and Ladakh High Court has held that the now-suspended cross-Line of Control (LoC) trade between the Union Territory and Pakistan-Occupied Kashmir (PoK) amounts to intra-state trade under the Goods and Services Tax (GST) framework, since PoK is legally part of the erstwhile state of Jammu and Kashmir.
A division bench of Justice Sanjeev Kumar and Justice Sanjay Parihar delivered the ruling while dismissing a batch of writ petitions filed by traders who had engaged in cross-LoC barter transactions between 2017 and 2019. These traders had challenged show-cause notices issued by tax authorities demanding GST on the supplies.
The court noted that both the “location of the suppliers” and the “place of supply” fell within the legal territory of Jammu and Kashmir, despite parts of it being under Pakistan’s de facto control.
In a key observation, the bench said:
“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 petitioners had argued that the barter-based system — carried out through the Uri–Muzaffarabad and Poonch–Rawalakot routes — involved no monetary exchange and thus qualified as a zero-rated sale attracting no GST. They maintained that the trade arrangement, set up through mutual administrative agreements between India and Pakistan, was distinct from regular commercial transactions.
Rejecting the challenge, the bench underscored that the GST Act provides a complete statutory mechanism for contesting tax demands.
“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.
With this, the High Court upheld the validity of the show-cause notices and directed the traders to pursue their objections before the appropriate GST authorities.
