GST shortfall: Chhattisgarh latest to join Centre’s borrowing scheme

By: |
December 04, 2020 2:45 AM

The borrowing proposal was presented to states after it became clear that compensation fund, which collects proceeds from cess imposed on goods under GST, was woefully inadequate to meet the protected revenue of the states.

GSTCustomers taking food delivery at their home or office are paying 13 per cent higher price on the same food and beverages compared to customers who are walking down to restaurants as the dine-in tax rate is 5 per cent, they claimed.

With the exception of Jharkhand, all states and union territories have now accepted Option-1 of the borrowing scheme meant to raise money for compensating states for the shortfall in protected GST revenue, the government said on Thursday after Chhattisgarh came on board.

The borrowing scheme under a special window was operationalised on October 23 and the central government has so far borrowed Rs 30,000 crore in five instalments. This has been passed on to states as back-to-back loans. The total borrowing under the scheme is fixed at Rs 1.1 lakh crore which is the shortfall attributed to GST implementation issues.

The option-1 of the scheme also allows states unconditional permission to borrow the final instalment of 0.5% of GSDP out of the 2% additional borrowings permitted by the the central government. This amounts to a little over Rs 1.05 lakh crore in the current fiscal for all the states, and is over and above the special window of Rs 1.1 lakh crore.
Initially, about 10 states had been opposed to the scheme on the grounds that they should be compensated fully for shortfall pegged at `1.82 lakh crore instead of only a portion (Rs 1.1 lakh crore) that is purely due to GST implementation issue without factoring in the impact of the pandemic.

The GST Council had earlier amended the law to extend the tenure of the compensation fund which was to lapse in 2022 — five year since launch of GST. This collection in the fund beyond 2022 will be used to pay the interest and principal of the loan first, after which the proceeds will go to the states for covering up the unmet shortfall of the current year.

The central government has estimated Rs 1.1 lakh crore as GST shortfall for states this fiscal from the level of protected revenue guaranteed to them under the law. States are assured of a 14% year-on-year growth in GST revenue which is met by their own revenue and any resultant shortfall is made up from cess funds.

The borrowing proposal was presented to states after it became clear that compensation fund, which collects proceeds from cess imposed on goods under GST, was woefully inadequate to meet the protected revenue of the states.

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