GST: Asking Grok!

Among the many matters I get trolled for, the top two are “GST” and “SRO 202”. The latter notified the Jammu & Kashmir Special Recruitment Rules, 2015, had very little to do with me except perhaps it being issued by the Finance Department since it had financial implications. It was a cabinet decision which I had opposed on the file and in the cabinet! But that is beside the point.

The introduction of GST was without doubt done under my watch and guidance. I take not only full responsibility for it, but also full blame/credit for it. I have for long wanted to put out my views. Indeed, I wrote a long rejoinder to the late A G Noorani who had written a vituperative column in Frontline against me for agreeing to GST but didn’t publish it out of sheer respect for that man. It would have embarrassed him.

In familiarising myself with the new Artificial Intelligence (AI) apps, I asked Grok, a conversational AI chatbot developed by xAI, Elon Musk’s company, the following question: “What was the role of Haseeb Drabu in the implementation of GST in J&K? Were any measures taken to protect the special status as provided for in the Constitution of J&K”?

Here is what Grok said, unedited:

Haseeb Drabu, as the Finance Minister of Jammu and Kashmir (J&K) from 2015 to 2018, played a pivotal role in the implementation of the Goods and Services Tax (GST) in the state, which was the last in India to adopt the new tax regime in July 2017. Given J&K’s special constitutional status under Article 370 and Section 5 of the Constitution of J&K, which granted the state exclusive taxation powers, Drabu took specific measures to safeguard these powers while integrating J&K into the GST framework. Below is a detailed analysis of the measures taken and the benefits accrued to the state.

Special Measures to Protect J&K’s Taxation Powers

1. Presidential Order to Safeguard Constitutional Provisions: Drabu ensured that the GST implementation in J&K was facilitated through a presidential order that explicitly protected the state’s special taxation powers under Section 5 of the J&K Constitution. This section granted J&K exclusive authority to legislate on taxes, a power not available to other Indian states, which derive their taxation powers from the Constitution of India. The presidential order stated that “notwithstanding anything contained in this order, the powers of the state of Jammu and Kashmir as per Section 5 of the Constitution of Jammu and Kashmir, shall remain intact,” ensuring that J&K’s legislative competence in taxation was preserved.
2. Incorporation of GST Council Under Article 370 & Safeguards: The order further mandated that any decision in the GST Council impacting J&K’s constitutional provisions would require the concurrence of the state’s representative. This was a critical safeguard to maintain J&K’s fiscal autonomy within the GST framework. Further, to prevent the GST Council from undermining J&K’s fiscal autonomy, Drabu advocated for the council’s decisions to operate within the ambit of Article 370. This meant J&K’s unique position was accommodated by requiring its concurrence on matters affecting its constitutional framework.
3. Modified Application of GST: Drabu proposed and implemented GST in a “modified manner” to align with J&K’s special constitutional position. The resolution passed by the J&K Legislative Assembly on July 5, 2017, ensured the application of GST in a modified manner to safeguard the existing special constitutional position of J&K in the Union of India and the legislative powers under the Constitution of J&K.”
4. Refund of SGST: The transition from the Value Added Tax regime to GST, invalidated the sales tax exemptions under the J&K Industrial Policy-2016. The J&K government introduced SRO-63 on February 5, 2018, which allowed for a 100% reimbursement of the SGST share paid in cash by eligible industrial units, provided their finished goods were sold or consumed within J&K.
5. Legislative Approval: A special session of the J&K Legislative Assembly was held from June 17, 2017, to debate the GST resolution, marking the first time a constitutional amendment was discussed in the state assembly before being extended to J&K. Drabu also tabled the presidential order in the assembly, a departure from tradition, to ensure transparency and legislative oversight, further reinforcing the state’s authority over tax-related decisions (emphasis added).

Very factual and comprehensive! The only point Grok missed is that J&K was the only state which retained the octroi/toll post at Lakhanpur under the Jammu and Kashmir Levy of Tolls Act, Samvat 1995. J&K continued to levy toll tax and annually collect Rs 800 crores despite the cardinal “one nation, one tax” principle.

Post 2019, all these details have only archival value for future economic historians to analyse. The proof of the pudding is in the eating. How has J&K fared after the implementation of GST? I had then estimated that GST would boost J&K’s tax revenue by Rs 1,500 crore to Rs 2,000 crore annually. This was not a policy maker’s optimism but based on a macroeconomic understanding of the fiscal system: as a consumption-based tax, GST is bound to benefit J&K because it is a consumer state which relies heavily on imports from other parts of the country. The shift from a production-based tax, like VAT, to a consumption-based tax GST ensured that J&K retained more tax revenue from goods consumed within the state.

Two statistics bear this out. The state’s own revenues have increased from Rs 7819 crore in 2016-17, to Rs 21,550 crore in 2025-26. It is a three-fold in eight years. Mind you, this is despite the one-year lockdown followed by another year of covid pandemic. Despite these disruptions stalling the realisation of GST’s potential in J&K, it has unlocked the tax potential of the state.

J&K’s own tax revenue has increased from Rs 4745 crores in 2011-12 to Rs 21, 550 crores in the current year; this is a more than five-fold increase in own revenues over 15 years. Since the GST rollout in 2017, J&K has seen a sharp rise in own-tax revenue, growing from ₹2,400 crore in FY18 to over ₹8,670 crore in FY25. Monthly GST receipts have more than tripled, and GST now constitutes over sixty percent of the UT’s tax base. The burden has obviously increased on people. While no one likes to pay taxes, but the fact is that it is a pillar of fiscal autonomy.

The most relevant measure of fiscal autonomy is percentage of revenue expenditure financed by own taxes. This share has increased from 21 per cent to 28 per cent over the same period. Pre GST the SOTR of J&K funded about 30 per cent of the revenue expenditure. Post GST it funds 40 per cent. In that sense fiscal dependence on Centre had declined 10 basis points in 8 years. The rise in own-tax share from 5.7% to 6.5% of the budget signals modest fiscal self-reliance, but dependence on central grants is still very high.

While the fiscal math is encouraging, sectoral pain points persist. Handicraft exports have dropped by over 35 per cent in a year, hit by higher GST rates and refund delays. The tourism sector taxed at 18 per cent continues to voice concerns over affordability and competitiveness. Horticulture faces input cost pressures, with farmers citing limited relief despite lower GST on packaging materials. The benefits of a unified tax regime: simpler compliance, interstate trade, and input credits have improved transparency and market access.

GST has benefited the government more than it has the economy. Even as it has formalised the J&K’s economy. The registered taxpayer base has expanded from 72,000 to 2.2 lakh, reflecting a significant push toward formalization and digital compliance.

The author is Contributing Editor Greater Kashmir