GST revenue shortfall: Chhattisgarh opts for govt’s borrowing option
Congress-ruled Chhattisgarh has become the latest state to accept the central government’s offer to borrow Rs 1.1 lakh crore on behalf of state administrations to meet a Rs 2.35 lakh crore shortfall in their share of revenue from the Goods and Services Tax (GST) this fiscal year, largely on account of the pandemic.
Jharkhand is the lone state to hold out. Thirty members of the GST Council – 27 states and 3 Union territories -- have formally accepted the first borrowing option proposed by the Centre in August this year, an official in the Union government said, requesting anonymity.
“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 three Union Territories (UTs) with legislative assembly have decided in favour of Option-1,” the Union finance ministry said in a statement on Thursday.
At the 41st GST Council meeting on August 27, the Centre offered two borrowing options to states to meet their revenue shortfall in the current financial year.
Two days later, it specified that under the first option, states would not have to pay either the principle or interest if they borrow only Rs 97,000 crore (later raised to Rs 1.1 lakh crore) to meet the shortfall because of implementation issues.
They would have to bear significant interest costs if they chose the larger borrowing option of Rs2.35 lakh crore that included revenue shortfall because the Covid-19 pandemic, which was described as “an act of God”.
Initially 10 states – mostly administered by non-National Democratic Alliance (NDA) parties -- objected and insisted that the Centre borrow the entire amount and reimburse them for the shortfall without imposing any direct interest burden on states.
They were Chhattisgarh, Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal.
The Union government eventually agreed to do on and on October 23 set up a special borrowing window for the purpose. It has already borrowed Rs30,000 crore on behalf of the states and passed it 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.
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