Experts say J&K's attempt to bring alcohol, petrol under GST not viable

J&K is essentially attempting to replace the VAT levied on petrol, state excise duty on alcohol, state-level duty on electricity, and stamp duty on land with SGST

Attempting to bring electricity, petrol, real estate, and alcohol under the state goods and services tax (SGST) might not be a complete solution for Jammu and Kashmir (J&K) but only partially help it in getting credit for taxes paid on inputs bought in the state.

According to reports, J&K has set up a high-level panel to prescribe the modalities to bring petrol, electricity, alcohol, and real estate under GST. The decision might be announced as part of the state budget in January. 

However, in order to bring alcohol under GST, a constitutional amendment will be required and that might take longer. 

J&K is essentially attempting to replace the value-added tax (VAT) levied on petrol, state excise duty on alcohol, state-level duty on electricity, and stamp duty on land with SGST.

Meanwhile, Union Finance Minister Arun Jaitley had said in the US last week that the GST Council would deliberate on bringing real estate under GST. 

While work contracts for under construction houses are within the GST's ambit, stamp duty and land are not. 

If these measures are implemented by the state, traders will get a refund of the input tax paid in the form of SGST. 

"Subsuming petrol, alcohol, and electricity in SGST of just one state may not be a viable solution. In any case, for bringing in alcohol under GST, we would need a constitutional amendment," said Pratik Jain of PwC India. He added that a better solution would be to bring petroleum products under CGST and SGST in all states.

"If needed, central excise duty can continue over and above GST for some time. It will ensure seamless flow of input credits across the chain," he said.

States have been wary of giving up on their revenue collection from VAT and stamp duty on these items. However, Delhi Finance Minister Manish Sisodia has lent support for bringing real estate under GST.