Chhattisgarh joins 27 states and 3 UTs to opt for GST loan, Jharkhand is lone dissenter

The Centre had given two borrowing options to states to meet their revenue shortfall of about Rs 2.35 lakh crore in the current financial year.

Chhattisgarh is the latest State to accept the Centre’s borrowing option of Rs 1.1 lakh crore to meet the Goods and Services Tax (GST) shortfall in 2020-21, making Jharkhand the lone dissenter.

30 members of the GST council including 27 states and 3 UTs have formally accepted the first borrowing option proposed by the Centre. (HT photo)

“Government of Chhattisgarh has communicated its acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation. The number of states who have favoured Option-1 has gone up to 27. All states except Jharkhand and all the 3 Union Territories (UTs) with legislative assemblies, have decided in favour of Option-1,” Union finance ministry said on Thursday.

Now, 30 members of the GST council – 27 states and 3 UTs -- have formally accepted the first borrowing option proposed by the Centre in August this year, reducing the number of dissenting states to just one, an official in the Union government said requesting anonymity.

At the 41st GST Council meet on August 27, the Centre had given two borrowing options to states to meet their revenue shortfall of about Rs 2.35 lakh crore in the current financial year. Two days later, it had specified that under the first option, states would not have to pay either the principle amount or the interest if they borrow only Rs 97,000 crore (later this amount was raised to Rs 1.1 lakh crore) to meet the GST revenue shortfall because of implementation issues. However, they would have to bear significant interest costs if they choose the larger borrowing option of Rs 2.35 lakh crore that included revenue shortfalls due to an “act of god”, which was the Covid-19 pandemic.

Initially 10 states – Chhattisgarh, Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal-- mostly administered by non-National Democratic Alliance (NDA) parties, objected and insisted that the entire borrowing should be done by the Centre without imposing any direct interest burden on States. They were.

Under the first option, the Union government on October 23 set up a special borrowing window for this purpose and borrowed an amount of Rs 30,000 crore on behalf of states, which was passed on to them.

“The funds borrowed through the special window were released to the States and UTs on 23rd October, 2020, 2nd November, 2020, 9th November, 2020, 23rd November, 2020 and 1st December, 2020. Now the State of Chhattisgarh will also receive funds raised through this window starting from the next round of borrowing,” the statement said.