Demonetisation could derail GST, say ministers


The demonetisation drive continues to cast a shadow on the deliberations of the GST council to implement the Goods and Services Tax (GST).

At the end of day-1 of the eighth GST council meeting, the centre and the states are nowhere near a consensus on dual control or compensation.

Several state finance ministers said that even a June or July deadline for rolling out GST looks impossible, with the number of issues that remain unresolved.

“Tsunami of demonetisation has led to everyone’s compensation going up. Last December our tax collection grew by 11% and this year tax collection stood at a negative 2% due to demonetisation,” said West Bengal finance minister Amit Mitra.

So states led by West Bengal are now demanding 100% compensation for revenue losses once GST is implemented.

Though the issue of compensation was already discussed and agreed upon in earlier meetings, the demonetisation initiative has reportedly spurred the states to demand changes in the law – including bi-monthly payment of compensation instead of quarterly.

At a previous meeting in October, the council had already fixed the compensation meant to be given to the states for the first five years once GST is rolled out. With 2015-2016 fixed as the base year, the likely compensation for states was based on a projected 14% revenue growth.

But now the issue is back on the drawing board.

The other issue that remained unresolved is interstate sale of goods and services that will constitute the IGST legislation.

“We could not reach a consensus on IGT so we could not even touch the issue of dual control,” said West Bengal finance minister Amit Mitra.

The council will meet again on Wednesday.


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