Cross-LoC Trade Counted As Intra-State GST Since PoK Part Of India: J&K High Court

The Jammu & Kashmir and Ladakh High Court on Saturday ruled that trade across the Line of Control (LoC) between traders in the Union Territory and Pakistan-Occupied Kashmir (PoK) qualifies as intra-state

trade under the Goods and Services Tax (GST) regime.

The court noted that PoK remains legally part of the erstwhile state of Jammu and Kashmir.

The judgment came while hearing a batch of petitions filed by traders who conducted barter-based cross-LoC exchanges between 2017 and 2019.

The petitioners challenged show-cause notices issued by GST authorities seeking tax payments, disputing the classification of both the territorial jurisdiction and the nature of the supply.

A division bench of Justice Sanjeev Kumar and Justice Sanjay Parihar dismissed the petitions, holding that the traders must pursue the statutory remedies available under the CGST Act rather than bypassing them through writ petitions.

“It is not in dispute that the territory currently under Pakistan’s de facto control legally forms part of the former State of Jammu & Kashmir. Accordingly, both the suppliers and the place of supply fell within the then State’s territory. The cross-LoC transactions carried out during the relevant tax period therefore constituted intra-state trade,” the court observed.

The bench added that since the GST Act provides an “equally efficacious” mechanism for appeal and review, the traders should approach the designated authorities instead of invoking the court’s writ jurisdiction.

During the hearing, counsel for the petitioners argued that the cross-LoC exchanges, between Islamabad and Uri, and between Rawalakot (PoK) and Chakkan-da-Bagh in Poonch, operated purely as barter trade without any monetary exchange, as mutually agreed upon by India and Pakistan.

The traders maintained that they treated these transactions as zero-rated and therefore exempt from sales tax.

Cross-LoC trade, once seen as a key confidence-building measure between India and Pakistan, was suspended in 2019 amid concerns of misuse.