All States Accept Centre’s Borrowing Plan For GST Shortfall
Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

All States Accept Centre’s Borrowing Plan For GST Shortfall


Jharkhand has accepted the central government's borrowing proposal and will get Rs 1,689 crore through the special window to meet the goods and services tax revenue shortfall, the Finance Ministry said on Saturday.

With this, three union territories and all 28 states have accepted the central government's borrowing plan to meet the shortfall in tax collection.

All the 28 states and three union territories with legislature have decided to go for Option 1 to meet the revenue shortfall arising out of GST implementation. Jharkhand, the only remaining state, has now communicated its acceptance of Option 1, the ministry said in a statement. Union Territories of Delhi, Jammu & Kashmir and Puducherry, too, have accepted Option 1.

The states and union territories that choose Option 1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the central government.

The central government has already borrowed Rs 30,000 crore on behalf of the states in five installments and has passed it on to 26 states and three union territories on Oct. 23, Nov. 2, Nov. 9, Nov. 23 and Dec. 1.

From the next round of borrowings, Jharkhand and Chhattisgarh, too, would receive funds raised through this window. Earlier this week, Chhattisgarh communicated its acceptance for the borrowing plan.

The next installment of Rs 6,000 crore will be released to the states/union territories on Dec. 7, 2020, the ministry said.

Under the terms of option-1, besides getting the facility of a special window for borrowings to meet the revenue shortfall, states are entitled to get unconditional permission to borrow the final installment of 0.50% of gross state domestic product out of the 2% additional borrowings permitted by the central government.

This is over and above the special window of Rs 1.1 lakh crore.

On receipt of the choice of option-1 from Jharkhand, the central government has granted additional borrowing permission of Rs 1,765 crore to Jharkhand government (0.5% of Chhattisgarh's GSDP), it said.

Separately, Jharkhand will get Rs 1,689 crore through special borrowing window to meet the GST revenue shortfall.

Under the borrowing plan (option-1), the central government would borrow from market Rs 1.10 lakh crore, which is the revenue shortfall on account of the GST implementation. The remaining Rs 73,000 crore shortfall is estimated to be the revenue impact of the Covid-19 pandemic.

The second option given by the central government was that the states borrow the entire Rs 1.83 lakh crore collection shortfall.

Opposition-ruled states were initially against the borrowing plan saying that the central government should borrow the entire GST revenue shortfall and compensate the states.

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