Earlier, the GST Council meeting was scheduled for April but due to FM's other commitments, the meeting had to be postponed to next month.

In the meeting, compensation issue will likely be taken up as many non-BJP states are pressing for the extension of the GST compensation mechanism for beyond five years ending in June 2022.

Several states are pressuring the Narendra Modi government to extend a programme to continue compensation for losses from a GST or risk a stalemate in attempts to further simplify the structure. It poses the biggest challenge yet to the country's most significant tax reform in decades.

Finance ministers from the opposition-led Kerala, West Bengal and Chhattisgarh have said they will raise the issue at a meeting of the GST Council this month.

Tamil Nadu and Bihar, a state governed by PM Modi's ally, will also support the push, according to a Bloomberg report.

States are emboldened to take on the federal administration after the top court ruled last month that the GST Council's decisions are non-binding. If the Council, headed by federal finance minister doesn't agree, the states could unilaterally raise revenue with other taxes that goes against a push to standardize such duties across the countries.

"This is not an ego tussle between the center and states," said TS Singh Deo, finance chief in the mineral-rich Chhattisgarh. "The idea is to ensure increase in revenue and if it doesn't happen through the council then it will have to be from other avenues. This was supposed to be 'one nation one tax' and not 'one nation one budget.'"

The GST law

Under the GST law, the federal government has to compensate states for five years through June 2022 for giving up their tax-making powers and gaining their support for the consumption tax. The program cost $103 billion over the period. Several states want this to continue as it has become a key source of income to pay for salaries, subsidies and infrastructure development.

BJP and its allies rule 17 out of India's 28 states, as well as one of three federal territories that have an elected legislature. Five other provinces are directly administered by the federal government.

Giving in to states' demands may complicate finances at a time when Asia's third-largest economy is grappling with soaring prices as recovery gathers pace after the pandemic-induced slump. The government's $26 billion inflation-fighting plan risks widening fiscal deficit for the current year to 6.8% of gross domestic product, from 6.4%, according to analysts at Nomura Holdings.

The federal government has paid GST compensation until end-May to the states with only the June payment pending.

Last year, the Council extended the period of a levy that funds the compensation to states and said the money collected would go toward servicing the compensation amount borrowed during the pandemic.