Highlighting the devastating impact of the Pahalgam terror attack on the economy of Jammu and Kashmir, Chief Minister Omar Abdullah on Wednesday (September 3, 2025) sought the Centre’s support to deal with the situation.

The Union Territory (UT) was facing a severe fiscal crisis as its public revenues had “collapsed” in the aftermath of the April 22 terror attack in which 26 people were killed, he said.

Mr. Abdullah, who also holds the finance portfolio, told the 56th GST Council meeting in Delhi, that major economic sectors, including tourism, handicrafts, agriculture and horticulture, had come to a standstill after the attack.

Proposed GST reforms could further reduce the UT’s revenue by 10 to 12%, the Chief Minister said.

He was of the view that the GST Council could go ahead with rate rationalisation proposals, but suitable mechanisms should be devised to compensate states as well as UTs.

The Centre’s support to Jammu and Kashmir to deal with the fiscal crisis was critical, Mr. Abdullah emphasised.

“The major sectors of the economy, like tourism, transport, construction, and automobiles, have come to a standstill post April 2025. The proposed reform can further reduce our GST revenues by 10-12%.

“Hence, as the Finance Minister of Jammu and Kashmir, I am of the opinion that establishing suitable mechanisms and safeguards for the fiscal stability of States and UT’s is critical,” he said.

He highlighted the devastating impact of the event on the UT’s economy and called for the Centre’s support to deal with the situation, particularly in view of the proposed GST rate rationalisation.

“We may go ahead with the rate rationalisation proposal, while devising a mechanism for compensating States/UTs for their fiscal stability and creating safeguards for translating the benefits from rationalisation in the reduced prices to the masses of our country,” he said.

Mr. Abdullah stated that the GST reforms must consider the unique challenges faced by individual states and UTs.

He detailed how the local economy had been gaining renewed vigour before being “shocked” by the “Pahalgam incident” of April 2025. This event, and its aftermath, have brought major economic sectors—including tourism, handicraft, horticulture, and agriculture — to a standstill.

The Chief Minister also urged Union Finance Minister Nirmala Sitharaman-headed GST Council to address the “geopolitical challenges” facing the country and the severe fiscal pressures on his region following the terror attack.

He talked about substantial loss of jobs and businesses, and a decline in public revenues. “Today, all the sectors of economic activity, including tourism, handicraft, horticulture and agriculture, are badly affected. The flight of non-local workers has slowed down development of infrastructure projects,” the Chief Minister said.

Fully endorsing the two-tier (5 and 18%) GST structure proposal, the Chief Minister said, “My main concern is how do we ensure that this rate rationalisation eases the burden on the common man and makes these specific goods and services more affordable for the masses of our country.

“These often lead to classification disputes, inverted duty structures and compliance complexity. The recommendations of the Group of Ministers and the Union proposal deal with these distortions to a large extent and aim to minimise such aberrations. For the Trade and Industries, these will bring clarity, reduce litigation, and enhance compliance. Hence, I welcome and support the recommendations of the Group,” he said.

“We need to have systemic safeguards to assure us that the proposed rate changes result in major benefits for the consumers and are not cornered in the chain. There should not be any scope for profiteering from this rate rationalisation,” Mr. Abdullah said.

The Chief Minister also touched upon national economic issues, noting that the country’s growth path is “suddenly challenged by geopolitical challenges” and also pointed to “whimsical trade policies of the colonial era” that he said could restrict India’s access to 20% of the global market, affecting thousands of workers in sectors like agriculture, handicraft, and gems and jewellery.

Asserting that the GST, introduced in July 2017, remains the most ambitious federal tax reform in India’s fiscal history, he said that through these eight years, several steps and initiatives have been taken in tax structure, administrative mechanism, and technology frontier to improve efficiency and revenue mobilisation from GST, as also to facilitate honest taxpayers and dealers.

“The past year has been nothing but challenging for Jammu and Kashmir and for the entire nation. At the national level, we see our growth path suddenly challenged by geopolitical challenges.

“Our economy is steadily accelerating at a 6–7% growth rate. We have increased our export competitiveness and raised our share in global markets in goods and in services.

“Our forex reserves had quadrupled to $660 billion in the past two decades. But today we seek our market access being severely constrained by whimsical trade policies of the colonial era,” he said.

The Chief Minister said these policies will deprive us of about 20% of the global market and will seriously affect thousands of workers and entrepreneurs in the agriculture, handicraft, marine products, gems and jewellery sectors.

Published – September 03, 2025 08:41 pm IST

Union Finance Minister Nirmala Sitharaman and Union Minister of State for Finance Pankaj Chaudhary, during the 56th meeting of the GST Council, in New Delhi on September 3, 2025. Several CM’s of States attend the meeting.
| Photo Credit: ANI

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