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GST compensation: Kerala, West Bengal opt for option 1 to meet shortfall

Under the terms of option 1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, states are also entitled to get unconditional permission to borrow the final instalment of 0.50 percent of gross state domestic product out of the 2 percent additional borrowings permitted by the Centre.

November 25, 2020 / 06:16 PM IST

Kerala and West Bengal, two of the biggest states to have opposed the Goods and Services Tax (GST) borrowing plan, have opted for option 1 to meet the GST compensation shortfall.

Both the states will get Rs 10,197 crore through a special borrowing window to meet the GST compensation shortfall.

"Permission to raise additional Rs 11,309 crore through borrowings also issued to Kerala and West Bengal," the government said in a press release.

The states and union territories opting for option 1 would be getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Centre. The window has been operational from October 23 and the Centre has already borrowed Rs 24,000 crore on behalf of the states in four instalments and passed it on to those who had already opted for it. Kerala and West Bengal would receive funds raised through this window starting from the next round of borrowings.

Under the terms of option 1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, states are also entitled to get unconditional permission to borrow the final instalment of 0.50 percent of gross state domestic product (GSDP) out of the 2 percent additional borrowings permitted by the Centre.

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"This is over and above the special window of Rs 1.1 lakh crore... The Government of India has granted additional borrowing permission of Rs 4,522 crore to the state government of Kerala (0.5 percent of Kerala’s GSDP) and Rs 6,787 crore to the state government of West Bengal (0.5 percent of West Bengal’s GSDP)," the statement said.

“Some of the States are likely to approach SC against discriminatory and illegal action of Centre regarding GST Compensation. Kerala CM to chair a meeting of law, tax and finance departments and advocate general to take final decision on Kerala’s stance tomorrow afternoon,” Kerala finance minister Thomas Isaac had tweeted on October 15.

This was followed by the finance ministry announcing it would borrow Rs 1.1 lakh crore and give that amount as loan to states under a special borrowing window, rather than states do it on their own.
Moneycontrol News
first published: Nov 25, 2020 06:16 pm

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