J&K Industrial Units Fear Closure as GST Cuts Remove Reimbursement Benefits

J&K Industrial Units Fear Closure as GST Cuts Remove Reimbursement Benefits

Issue: The recent Goods and Services Tax (GST) rate rationalization (GST Reforms 2.0) has inadvertently led to the removal of essential tax reimbursement benefits for older industrial units in Jammu & Kashmir (J&K), creating an uneven playing field and threatening their viability.

Facts:

• The GST rate on certain finished goods (like food products and corrugated packaging) was cut from earlier slabs of 12% and 18% down to 5%, effective September 22, 2025.
• Industrial units established before April 1, 2021, were previously benefiting from a local incentive scheme under the J&K Industrial Policy 2021–30, which included tax reimbursement benefits.
• The reduction of the GST rate to 5% effectively eliminated these reimbursement benefits for older units.
• Newer units set up after April 2021 under the NCSS-2021 scheme continue to receive full 5% GST reimbursement.

Decision:

The Bari Brahmana Industries Association (BBIA) highlighted that the change has created an uneven playing field and may lead to the closure of approximately 150 MSME units employing nearly 6,000 workers, urging the J&K government to intervene.

Key TakeDowns:

• Loss of Incentives: The GST rate cut, intended as a relief measure, actually eroded the value of the existing industrial incentive package for older units, as the benefit was tied to the quantum of GST paid. * Uneven Competition: The key concern is the disadvantage faced by older units against newer units that continue to receive a 5% gross GST reimbursement under the NCSS-2021 scheme, making the latter significantly more competitive.
• Industry Request: The BBIA has requested a special incentive package to extend the full 5% gross GST reimbursement for the affected existing units in the food processing and corrugated box sectors until March 2031 to safeguard employment and viability.