The Union government has already borrowed Rs24,000 crore on behalf of states in four instalments during this window, which was operationalised on October 23.(PTI)
The Union government has already borrowed Rs24,000 crore on behalf of states in four instalments during this window, which was operationalised on October 23.(PTI)

Kerala and Bengal accept govt’s GST borrowing option

“While 28 members have formally accepted the first borrowing option proposed by the Centre, the total number of states may soon go to 29 as Punjab is also considering joining the majority.
Hindustan Times | By Rajeev Jayaswal, New Delhi
UPDATED ON NOV 26, 2020 03:07 AM IST

Kerala and West Bengal are the latest members of the Goods and Services Tax (GST) Council to accept the Centre’s borrowing option of Rs1.1 lakh crore to meet the indirect tax revenue shortfall in 2020-21, reducing the number of dissenting states to three from 10 in September, the Union finance ministry said on Wednesday.

“Governments of Kerala and West Bengal have communicated their acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation,” the ministry said in a statement. With this, the number of states and Union territories (UTs) that have accepted the first borrowing option has gone up to 28, it added.

“While 28 members have formally accepted the first borrowing option proposed by the Centre, the total number of states may soon go to 29 as Punjab is also considering joining the majority,” an official in the Union government said requesting anonymity. The Centre is yet to get formal acceptance from the governments of Punjab, Chhattisgarh, Jharkhand, the official added.

At the 41st GST Council on August 27, the Centre had given two borrowing options to states to meet their revenue shortfall of about Rs2.35 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 or interest if they borrow only Rs97,000 crore (later this amount was raised to Rs1.1 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 Rs2.35 lakh crore that included revenue shortfalls due to an “act of god”, which was the Covid-19 pandemic.

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

The states and UTs who opted for the first option are getting the amount of shortfall arising out of GST implementation through a special borrowing window, the statement said. The Union government has already borrowed Rs24,000 crore on behalf of states in four instalments during this window, which was operationalised on October 23.

“Now the State of Kerala and West Bengal will also receive funds raised through this window starting from the next round of borrowings,” the finance ministry said.

While formal notification with regard to Punjab is awaited, other 28 states and UTs to accept the first option are -- Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Telangana, Tripura, Tamil Nadu, Uttar Pradesh, Uttarakhand, Delhi, Jammu & Kashmir, Puducherry, West Bengal and Kerala.

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