MUZAFFARABAD: The Azad Jammu and Kashmir (AJK) Food Department on Thursday said a longstanding dispute over deduction of General Sales Tax (GST) from payments to wheat transportation contractors had been resolved after approval by the cabinet.

According to a press release, during a certification audit for the year 2021-22 by the Accountant General’s Sub-Office in Islamabad, an objection was raised for the first time regarding the non-deduction of GST from the contractors’ bills under the Finance Act 2019.

Following the objection, the Accountant General’s Office halted payments to contractors, triggering a strike by transporters who maintained that they had not been informed about the imposition of 16pc GST while submitting bids.

The contractors argued that their tender rates had been quoted after factoring in prevailing costs such as fuel prices, inflation and existing taxes, and that the sudden application of GST made their contracts financially unviable.

Upon learning about the deduction of GST from their bills, the contractors refused to continue work at the quoted rates and resorted to a strike, following which the then secretary food assured them at a meeting that while the taxes applicable for the remaining period, including GST, would be paid accordingly, the issue of past deductions would be taken up at the government level for resolution, the press release said.

It added that in March 2023, a high-level meeting headed by the then prime minister decided to defer GST deductions on past payments. It was further decided that an appropriate procedure would be adopted for the formal settlement of the issue. Contractors were informed that GST would be applicable to future contracts.

According to the press release, subsequent tenders clearly specified GST provisions, after which contractors submitted fresh bids and deductions began in line with the law.

Meanwhile, a summary seeking exemption from GST for the period between 2019 and 2022 was approved by the then prime minister, but the absence of a formal notification led contractors to approach the High Court for implementation of the decision.

Following court directions, the government constituted a committee which reviewed the matter in detail and recommended settlement of the issue under Section 65 of the Finance Act.

The cabinet endorsed the recommendations in 2025 and, after consultation with the Inland Revenue Department, a formal notification was issued, thereby settling the matter.

The Food Department said the decision had cleared ambiguities regarding GST applicability and would help ensure smooth payments to contractors and uninterrupted wheat supply across the region.

Published in Dawn, May 2nd, 2026