Chhattisgarh, Punjab to opt for centre’s borrowing option on GST shortfall

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Chhattisgarh and Punjab are in the process of writing to the Centre, accepting the special window for the goods and services tax (GST) compensation after the Union government had agreed to borrow on behalf of states. This leaves Jharkhand as the odd one out. The Hemant Soren-led state has, so far, not agreed to any of the Centre’s borrowing options devised to address the GST compensation shortfall.

After being on the fence, Kerala and West Bengal will get Rs 10,197 crore through a special borrowing window to meet the GST implementation shortfall.

“All the dissenting or opposing states, including West Bengal, Punjab, and Kerala, are in agreement to partly accept the modified first option. The earlier option was for states to take the loan, which is not the case anymore and the Centre will borrow now,” said Chhattisgarh Health Minister T S Singh Deo, who represents the state at the GST Council.

He said once the Union government agreed to borrow on behalf of states, there was little to disagree with. “Our chief minister will be writing to the central government in a day or two,” clarified Deo.

He added that states would continue to ask the Centre to borrow the entire shortfall, instead of only Rs 1.1 trillion. He said states would raise this issue at the next GST Council meeting.

“We have been suggesting that the entire shortfall be borrowed by the Centre. With the collections now improving, the shortfall may shrink. Whatever the figure may be – be it Rs 1.5 trillion or Rs 1.9 trillion – it must be borrowed by the Centre,” emphasised Deo.

The special window, totalling Rs 1.1 trillion, has been operationalised since October 23. The Union government has already borrowed Rs 24,000 crore on behalf of states in four instalments and passed it on to states and Union Territories that have opted for this window.

Besides this window, states are also entitled to get unconditional permission to borrow up to 0.5 percent of their respective gross state domestic product. However, this permission is reserved for those already signed up.

Kerala has been given permission to borrow Rs 4,522 crore and West Bengal Rs 6,787 crore from the markets. Similar permission will be given to Punjab and Chhattisgarh once they formally send in their assent in writing.

The Centre had estimated the total GST shortfall this year to be at Rs 2.35 trillion. Only Rs 1.1 trillion of this was due to GST, the rest due to Covid. It offered a special window of Rs 1.1 trillion. States were allowed to borrow 0.5 percent of their respective economic size from the markets.

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