Jharkhand, the only remaining state, accepts Centre’s ₹1.1L cr borrowing option
With this, the 31 members of the GST Council – 28 states and 3 union territories -- have formally accepted the first borrowing option of ₹1.1 lakh crore proposed by the Centre in August
Jharkhand, the only remaining state to oppose the Centre’s borrowing plan for meeting the Goods and Services Tax (GST) revenue shortfall, has formally accepted the Union government’s proposal, the finance ministry said on Saturday.
With this, the 31 members of the GST Council – 28 states and 3 union territories -- have formally accepted the first borrowing option of ₹1.1 lakh crore proposed by the Centre in August , an official in the Union government said, requesting anonymity. The total revenue shortfall in 2020-21 is, however, estimated at ₹2.35 lakh crore.
“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 finance ministry said in a statement.
At the 41st GST Council meeting on August 27, the Centre offered two borrowing options to states to meet their revenue shortfall in the current financial year. Two days later, it specified that under the first option, states would not have to pay either the principle or interest if they borrow only ₹97,000 crore (later raised to ₹1.1 lakh crore) to meet the shortfall because of implementation issues. They would have to bear significant interest costs if they chose the larger borrowing option of ₹2.35 lakh crore that included revenue shortfall because the Covid-19 pandemic.
Initially 10 states – mostly administered by non-National Democratic Alliance (NDA) parties -- objected and insisted that the Centre borrow the entire amount and reimburse them for the shortfall without imposing any direct interest burden on states. These states were Chhattisgarh, Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal.
Some of the dissenting states eventually agreed for the first borrowing option after the Centre accepted one of their demands to borrow on behalf of the state and pass on the same to them through a special window set up on October 23. However, it did not accept the other demand of 10 dissenting states to borrow the entire ₹2.35 lakh crore that also included the part of revenue loss because of the Covid-19 pandemic.
“The Government of India has already borrowed an amount of Rs.30,000 crore on behalf of the states in five instalments and passed it on to the states and union territories, who chose Option-1. Now the state of Jharkhand will also receive funds raised through this window starting from the next round of borrowing,” the statement said. The next instalment is due on December 7, 2020.
