Kerala, West Bengal join league of states choosing Centre’s Option-1 to meet GST implementation shortfall

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Updated: November 25, 2020 6:26 PM

After making a choice, Kerala and West Bengal are poised to get Rs 10,197 crore through special borrowing window to meet the GST implementation shortfall.

GST shortfall, GST implementation, goods and services tax, economic crisisThe government has already borrowed an amount of Rs 24,000 crore on behalf of the states in four instalments and has passed it on to them.

Kerala and West Bengal have joined the league of states choosing Option-1 to meet the GST implementation shortfall. Including these two states, 25 states and all union territories with Legislative Assembly have favoured Option-I proposed by the central government. After making a choice, Kerala and West Bengal are poised to get Rs 10,197 crore through special borrowing window, to meet the GST implementation shortfall. In addition, both states have also received permission to raise additional Rs 11,309 crore through borrowings, according to the Ministry of Finance.

The states & UTs that have chosen Option-1 are getting the amount equivalent to the shortfall arising out of GST implementation through a special borrowing window put in place by the Centre. The government has already borrowed an amount of Rs 24,000 crore on behalf of the states in four instalments and has passed it on to them. 

Also Read: Atmanirbhar Bharat 3.0: Cabinet approves Rs 6,000 cr equity infusion in NIIF debt platform

Besides getting the facility of a special window for borrowings, the states are also entitled to get unconditional permission to borrow the final installment of 0.5 per cent of Gross State Domestic Product (GSDP), out of the 2 per cent additional borrowings permitted by the Centre under the Atmnirbhar Abhiyaan. It is to be noted that the additional borrowing is over and above the special window of Rs 1.1 lakh crore.

Meanwhile, option-2 takes into account the impact of the pandemic, proposing states to borrow the entire Rs 2.35 lakh crore and bearing the interest burden, though principal will be repaid from the cess proceeds. The GST shortfall amount — Rs 97,000 crore — will not be counted as states’ debt, while the rest of the amount of Rs 1.38 lakh crore will be counted in the books of the states. The issue of GST cess compensation heated up in recent months after the opposition party-led states refused to choose the options presented by the Centre. However, after continuous efforts from the Centre, various such states opted for Option-1.

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