Barter Trade Taxable Under GST: J&K And Ladakh HC Dismisses 35 Petitions Against GST Notices to Cross-LoC Traders

The High Court of Jammu & Kashmir and Ladakh at Srinagar has dismissed a batch of 35 writ petitions filed by cross-LoC traders who challenged the GST show cause notices issued to them under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017. The Bench of Justice Sanjeev Kumar and Justice Sanjay Parihar has observed that barter trade conducted across the Line of Control (LoC) between 2017 and 2019 is an intra-state supply subject to GST, and therefore taxable. The traders had sought quashing of the notices and subsequent tax demands relating to barter transactions carried out across the Line of Control (LoC) during the financial years 2017–2018 and 2018–2019. The petitioners contended that even if the trade was treated as intra-state, it did not involve money exchange and was purely barter-based, making GST levy inappropriate. They also argued that the notices should have been issued under Section 73 for cases without fraud or suppression rather than under Section 74. Rejecting the argument, the Court observed that the show cause notices contained categorical allegations that the assessees failed to report outward and inward supplies in their GSTR returns, did not cooperate during investigation, and did not furnish invoices and documents despite requests. The bench concluded that the allegations, at least prima facie, indicated suppression of material facts, thereby justifying initiation of proceedings under Section 74. The Court held that the barter trade conducted across the LoC after the implementation of GST constituted intra-state supply within the meaning of the CGST/JKGST Acts. According to the bench, areas under Pakistan-occupied Kashmir are constitutionally part of the territory of India, and therefore trade between both sides of J&K does not fall under import or export but under domestic supplies. The court noted that although barter trade was previously treated as zero-rated during the VAT regime, no exemption notification was issued under the GST regime, meaning the transactions became taxable once GST came into force on 8 July 2017. The Court also ruled that the notices were within the prescribed limitation period. For the financial year 2017–2018, the due date for filing annual returns stood extended until 5 February 2020, while for 2018–2019 it remained extended until 31 December 2020. Since the notices were issued on 4 August 2024, the Court found that they were well within the window permitted by Section 74, which allows authorities five years to pass a final order and requires that notices be issued at least six months prior to expiry of that timeline. Another major challenge raised by the petitioners was that the GST authorities improperly “bunched” demands for multiple financial years into a single show cause notice. On this issue also, the High Court ruled in favour of the department, observing that the law does not prohibit composite notices provided that year-wise tax calculations, allegations, and grounds are clearly detailed. The bench found that the notices issued in these cases contained year-wise quantification and specific allegations, and therefore could not be termed vague or prejudicial. Having found no jurisdictional error in the issuance of the notices, the Bench held that the writ petitions were premature and that the petitioners should exhaust statutory remedies available under the CGST Act. Those petitioners who have not yet responded to the notices have been given four weeks to file replies, after which the adjudicating authority must complete proceedings within three months. For petitioners against whom final demand orders have already been issued under Section 74(9), the Court clarified that they are entitled to challenge such orders through statutory appeals under Section 107 within three months. While dismissing the writ petitions, the Court made it clear that although it has formed prima facie views to determine the writ proceedings, the adjudicating and appellate authorities must decide the matters independently on merits. Case Details Case Title: M/s New Gee Enn & Sons Versus UOI Case No.: WP(C) 1938/2024 Date: 27.11.2025 Counsel For Petitioner: S. F. Qadiri, Sr. Adv. Counsel For Respondent: Tahir Majid Shamsi Click Here To Read Order Read More: Delhi HC Refuses To Release of 222g Gold Bangles, File Statutory Appeal Against Customs Confiscation Order

Barter Trade Taxable Under GST: J&K And Ladakh HC Dismisses 35 Petitions Against GST Notices to Cross-LoC Traders

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