The issue of demonetisation of high value currency notes of ₹500 and ₹1,000 is likely to crop up at the crucial meeting of GST Council that starts on Friday.
The GST Council will hold a two-day meeting to finalise the issue of jurisdiction of the Centre and State tax officials as well as the draft model legislations.
“It (demonetisation) is not on the agenda, but it is likely to be discussed,” said a State Finance Minister. While some States have supported the move by the Centre, others have voiced concerns.
West Bengal Finance Minister Amit Mitra had recently said GST may be difficult to implement from next April as demonetisation is impacting States’ economy.
The States are also unlikely to budge from their stance for greater administrative control under the Goods and Services Tax regime.
“We are very firm for greater administrative role for the States. We will not back down from it and we hope that the Centre, which has been very accommodative till now, continues to be so,” said a State Finance Minister.
The Centre is hoping to wrap up discussions on the major issues on GST in the meeting to enable the passage of the Bills for Centre, State and Integrated GST and compensation in the Winter Session of Parliament and State Assemblies. This will also ensure that the indirect tax reform is rolled out from April 1, 2017.
However, this can happen only if there is an agreement on administrative control. “A stalemate can continue if there is no give and take,” said another State Minister.
The Centre and States have been unable to reach a consensus on the administrative control of taxpayers under GST.
States Including Kerala, Uttar Pradesh, West Bengal and Tamil Nadu have called for horizontal division of assesses under GST, which would mean that they would have exclusive control over small businesses that have an annual turnover of less than ₹1.5 crore. There would be cross empowerment of officials of the Centre and States beyond this limit.
However, calling for easier registration and compliance procedures, a number of other States and also the Union Finance Ministry have argued for a vertical division of assessees under which both the Centre and States will get a fixed number of assessees.