Policy implementation and state capacity: a case of goods and services tax in Jammu and Kashmir

The Goods and Service Tax regime, implemented in the union territory of the Jammu and Kashmir with effect from July 2017, has been taken as a case to study the reasons for gov-ernment organizations implementing any new policy reform as per established norms rather than switching to execution mode as per its requirements. The GST is being considered a mage shift in the tax policy of India from the erstwhile VAT structure which was legislated and administered at state level. The implementation of GST on one hand led to fulfilment of political slogan of ‘one nation one tax’ and on the other hand revolutionized the indirect tax system by subsuming fifteen taxes, six national and nine sub-national, into one basket resulting in less compliance, time and administrative costs. However, while the GST policy as such is efficient and information and communication technology (ICT) driven, no atten-tion has been paid to strengthen the tax authorities who have to regulate and administer the same. This study, therefore, assessed the capacity and readiness of the State Taxes Depart-ment to implement the Goods and Service Tax regime in Jammu and Kashmir. This aspect of the Department is assessed by analysing its capacity, agility and structure. The challenges faced by the State Taxes Department on these fronts were studied and corrective measures recommended. To achieve the results, a qualitative methodological approach was adopted by interviewing key informants from the Taxes Departments, Traders, members of Com-merce and Industry Chambers. Quantitative data has been collected form websites of GST Council, Ministry of Statistics and Program Implementation, Government of India, Finance Ministries of different states to compare the GST collection at national level and in the neigh-bouring states of J&K. The findings of the study revealed that the State Taxes Department, J&K is lacking the capacity to implement GST due to its non-agility as the same is neither properly structured nor having capacity and a specialized service to administer it. Besides, the enforcement mechanisms adopted are too weak to result in deterrence amongst GST evaders. Thus, for successful GST implementation as pr requirement of the policy, the state government needs to restructure the STD as per design of GST law, create specialized taxa-tion service, focus on capacity building of officers of STD and strengthen the enforcement wing of the department.