New Delhi: Demonetisation has derailed the mutual trust between the centre and states, Kerala finance minister Thomas Isaac said on Twitter on Monday, blaming the centre’s move for causing a delay in plans to implement the Goods and Services Tax (GST) from 1 April 2017.

“#DeMonetisation derailed the mutual trust. Topples the #GST plans from Apr 1st," Isaac wrote on the microblogging website.

Kerala along with West Bengal has been up in arms against the centre’s decision to declare the Rs500 and Rs1,000 banknotes illegal tender from 9 November citing the negative fallout on the common man and on state finances. Both states have argued that given the adverse impact of demonetisation on state finances, GST’s implementation should be delayed to prevent a double whammy.

In a series of tweets after the sixth meeting of the GST Council, which concluded on Sunday without finalizing supporting bills for GST, Isaac tweeted, “GST law not in winter session. Council stalemate continues. Only 100 sections of 200 sections of model law were agreed upon so far," adding that Monday’s meeting was given up on the pretext of Eid as discussions on the bills would not have concluded.

Isaac echoes the views of West Bengal finance minister Amit Mitra who had earlier said that states are not prepared for the “double whammy" of GST and demonetisation.

“We must do GST, but do it at a time when it is feasible, successful, when states’ revenues do not decline significantly, centre is able to compensate the states and federal polity of India is preserved. I do not see that at this time," Mitra had said.

Three bills—the central GST bill, the integrated GST bill and the bill to compensate states for revenue losses arising in a transition to GST—were to receive the council’s nod and be tabled in the ongoing session of Parliament. But so far, none of the bills have been completely vetted by the council.

With the delay in the passage of the bills in Parliament, the centre is likely to miss the deadline to introduce GST. However, the implementation can only be delayed till September 2017 after which existing indirect tax laws become null and void.

GST, being an indirect tax, can be levied from the beginning of any month and not necessarily at the start of a financial year.

The next meeting of the council on 22 and 23 December will continue the discussions on the draft central GST and state GST laws. After this, the integrated GST laws, where the contentious issue of sharing of administrative powers will be discussed, will be taken up by the council. States like Tamil Nadu, Uttar Pradesh, West Bengal and Kerala, which are not part of the ruling National Democratic Alliance (NDA), have been demanding exclusive control over traders with an annual threshold of less than Rs1.5 crore.

But the centre feels that conceding this demand will disempower it and leave the central board of excise and customs with a very small number of traders to control.

This issue has remained unresolved in the last six GST council meetings.

“There is a constitutional mandate to implement GST at least from September onwards. The states and the centre have to reach a consensus by then on the pending issues including dual control. The non-NDA states also understand this limitation of implementing GST from September," said A.K. Verma, a Kanpur-based political analyst and political science professor at Christ Church college.

“These are pressure tactics being employed by them to delay GST by a few more months."

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