GST Council meet today may see demonetization storm

After calling off the last meeting due to differences between states and demonetization, the Goods and Services Tax (GST) Council is set to meet today to decide on crucial issues of dual control, classification of products under different tax brackets and final model GST Acts.

Today's meeting is significant in the light of the controversial comments made by West Bengal finance minister Amit Mitra on Wednesday, where he said that demonetization – making over 85% of old Rs 500 and Rs 1,000 currency notes illegal – will delay implementation GST.

The WB minister, who headed the empowered group of finance ministers for GST, also said that GST, along with demonetization, would be fiscally damaging for the states.

Tax analysts are not expecting the meeting to be as "easy-going" as it has been till now. All the decisions taken until now have been on consensus.

M S Mani, senior director - indirect tax, Deloitte, said since GST would be beneficial for WB, Mitra could separate the two issues.

He said if the government was not confident of taking a decision by majority in the latest meeting, it would have cancelled it; "They must be confident of taking decisions on GST with majority or they would have called it off."

However, the Deloitte indirect tax consultant does expect the meeting to be smooth flowing. "Unlike past meetings, it's (today's meeting) going to be stormy."

The Council is going to deliberate on three major issues. The first is cross empowerment, on which they have yet to achieve consensus. The second was deciding which goods fell under which tax bracket. The government has set up a committee of secretaries to work on this. The panel would submit its report in the meeting. The third point of discussion would be revised model Act for GST – Central GST (CGST), integrated GST (IGST) and Compensation Act – that was published four days back. The state's view on these draft legislation would be considered in the meeting.

What would be watched is which finance minister attends the meeting and which does not. Many expect WB finance minister to boycott the meeting.

In such an event, it would be inferred there was a lack of quorum in the meeting and so decisions would be put to vote and would require a three-fourth majority to be approved. This would be a lengthy process.

Deloitte's Mani believes today's and Saturday's meetings is going to be "extremely significant" to know whether GST is going to happen on April 1, 2017, or not.

The Council has already decided a four-tier – 5%, 12%, 18% and 28% – GST rate structure and compensation to states for revenue losses through consensus.