EASE OF DOING BUSINESS – PART-V: Policy on Paper, Penalty in Practice

Srinagar, Mar 30: A serious contradiction has emerged in Jammu and Kashmir’s industrial framework, where the government’s Industrial Policy 2021-30, widely projected as a pro-business reform, is facing criticism over what industry stakeholders describe as selective and distorted implementation, particularly in Kashmir.

At the centre of the issue is Section 4.3 of the policy, which provides for 100 percent exemption from stamp duty on land transactions in government industrial estates.

The exemption explicitly covers lease deeds as well as mortgage deeds and is applicable to both new industrial units and existing units undertaking substantial expansion.

The stated objective of this provision is to reduce the cost of doing business, promote the formalisation of enterprises, and improve access to finance.

However, in practice, the implementation of this provision has diverged sharply from its stated intent.

While the policy has largely been implemented in favour of new units, its application in the case of existing enterprises has become inconsistent and region-specific.

The government data indicates that 20,417 kanal of land have been identified in newly developed or developing industrial estates across Jammu and Kashmir, including 11,707 kanal in Jammu and 8710 kanals in Kashmir.

Nearly 75 percent of this land has already been allotted, mostly with full exemption from stamp duty and court fees extended to new units.

Sources said that in the Jammu region, registering authorities have reportedly extended the exemption even for existing units undergoing restructuring or expansion. However, in Kashmir the position has been reversed.

After initially granting exemptions, Sub-Divisional Magistrates were advised by the Directorate of Industries and Commerce, Kashmir, that such exemptions were erroneous.

What followed was not clarification but escalation.

As reported earlier by Greater Kashmir, existing units are being compelled to execute supplementary lease deeds for the same land already allotted to them, every time there is a change in constitution, such as the induction or retirement of partners, or the conversion into a company.

This effectively treats routine internal restructuring as a fresh land transaction, triggering stamp duty liabilities all over again.

More strikingly, stamp duty is not confined to land transactions.

It is being levied on the entire value of the industrial unit, including land, buildings, and even plant and machinery – an interpretation that finds no basis in the policy itself.

The consequence is a massive and arbitrary financial burden on enterprises, particularly MSMEs.

The process through which this liability is determined further exposes the administrative dysfunction.

Cases are referred to the Superintending Engineer (R&B) for valuation of buildings and to the Superintending Engineer (Mechanical) for assessing the cost of plant and machinery.

From there, files move through a bureaucratic chain – from Superintending Engineers to Executive Engineers, then to Assistant Executive Engineers, Assistant Engineers, and finally Junior Engineers.

What should be a straightforward determination turns into a prolonged exercise stretching over months, often more than a year.

This is not merely procedural delay – it is a systemic obstruction to business continuity and growth.

Enterprises seeking to restructure for capital infusion, expansion, or formalisation are instead trapped in a cycle of valuation, approvals, and financial demands that stall decision-making.

The financial impact is already visible.

It is reported that over Rs.80 lakh has been collected from MSMEs in Kashmir under this regime – collections that have no parallel in the Jammu region.

A policy meant to incentivise industrial growth is thus being used to penalise existing local enterprises, raising serious concerns of discrimination, inconsistency, and erosion of policy credibility.

When the issue was taken up by apex business organisations, the Directorate indicated that it had referred the matter to the Administrative Department for clarification.

Yet, nearly a year later, no formal clarification has emerged. The matter continues to move across administrative layers – Minister, Commissioner, Secretary, and Law Department – without resolution.

This prolonged indecision is particularly striking given that the Administrative Department itself authored the policy. If a simple provision requires a year of “clarification,” the question is unavoidable: is the ambiguity genuine, or is it being sustained?

The implications go beyond delay.

Any policy incentive must be uniform, predictable, and non-discriminatory. Selective application – where one region benefits and another is burdened – undermines not only policy integrity but also investor confidence.

It also contradicts national reform principles aimed at ensuring fairness and consistency in industrial governance. Equally concerning is the narrowing of the exemption’s scope. There is no logical basis to exclude changes in constitution, internal restructuring, or mortgage transactions, particularly where ownership remains substantially unchanged. Similarly, units operating on private land and sectors like tourism – granted industrial status – are denied parity without justification.

What emerges is a clear pattern: policy clarity at the top, administrative distortion at the ground level.

Incentives exist on paper but are neutralised in practice through procedural hurdles, inflated valuations, and repeated financial impositions on the same asset.

Even national oversight bodies have begun to take note.

The Comptroller and Auditor General of India (CAG), following complaints on Ease of Doing Business, has reportedly received adverse feedback from Kashmir regarding delays and discriminatory practices.

Its findings are awaited, but the reality on the ground is already evident.

In effect, the Industries and Commerce Department’s role as a facilitator of industrial growth stands compromised. Instead of enabling enterprise, it appears entangled in procedural excess, interpretational rigidity, and revenue-driven practices.

The narrative of ‘Ease of Doing Business’ thus remains largely cosmetic – more projection than performance.

For entrepreneurs in Jammu and Kashmir, particularly in Kashmir, the conclusion is stark: the same land allotted as an incentive is being monetised repeatedly, and every step toward growth is met with delay, discretion, and cost.