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States Select Centre’s Borrowing Option 1 To Meet GST Shortfall – Unblendednews

States Select Centre’s Borrowing Option 1 To Meet GST Shortfall


States Select Centre's Borrowing Option 1 To Meet GST Shortfall

The government said the next instalment of GST compensation will be released on December 7.

The Union government said on Saturday that all states and three Union Territories have picked the first of the two options to receive compensation on account of implementation of Goods and Services Tax (GST). Under the plan selected by states, the central government will borrow Rs 1.10 lakh crore from the market, to meet the states’ revenue shortfall. The remaining shortfall of Rs 73,000 crore is estimated to be due to the coronavirus pandemic. (Also Read: Centre Transfers First Tranche Of Rs 6,000 Crore In GST Compensation To States)

Jharkhand became the latest state to go for Option 1, the Finance Ministry said in a press release.  The state will receive Rs 1,689 crore through a special borrowing window to meet the GST shortfall.

The government said it has set up a special borrowing window for the states and union territories to borrow the amount of shortfall arising out of GST rollout. The window came into operation on October 23, and the government has already borrowed Rs 30,000 crore on behalf of states in five instalments.

The next instalment, of Rs 6,000 crore, will be released to the states and Union Territories on December 7, the ministry said.


Under the GST law, which was implemented in 2017, the states were guaranteed compensation for any loss of revenue in the first five years of the new indirect tax regime. The states were mandated to increase their share of revenues by 14 per cent per year.

Meanwhile, the government’s GST collections crossed the Rs 1 lakh crore mark for a second straight month in November, official data released earlier this month showed. 

The government has said that COVID-19 has severely impacted GST collections this year.


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