Jharkhand opts in, all states accept Centre's borrowing plan for GST shortfall

Jharkhand has accepted the Centre's borrowing proposal and will get Rs 1,689 crore through the special window to meet the GST revenue shortfall, the finance ministry said on Saturday.

With this, 3 union territories and all 28 states have accepted the Centre's borrowing plan to meet the shortfall in tax collection.

“ All the 28 states and 3 Union Territories with legislature have decided to go for Option-1 to meet the revenue shortfall arising out of the 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 have accepted Option 1.

The states & UTs who choose Option-1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Centre.

The Centre has already borrowed Rs 30,000 crore on behalf of the states in five installments and has passed it on to 26 states and 3 UTs on October 23, November 2, November 9, November 23 and December 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/UTs on December 7, 2020, the ministry added.

Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the revenue shortfall, states are also entitled to get unconditional permission to borrow the final installment of 0.50 per cent of Gross State Domestic Product (GSDP) out of the 2 per cent additional borrowings permitted by the Centre.

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 Centre has granted additional borrowing permission of Rs 1,765 crore to Jharkhand government (0.5 per cent of Chhattisgarh's GSDP), it added.

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 Centre would borrow from market Rs 1.10 lakh crore which is the revenue shortfall on account of 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 Centre 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 Centre should borrow the entire GST revenue shortfall and compensate the states.