All states consider the option of borrowing Rs 1.1 lakh crore to meet GST shortfalls.

Key points:

1.  The Government of India has given additional borrowing permission of Rs.1,765 crore to the State Government of Jharkhand.
2. For the states and UTs that prefer Option-1 to borrow the sum of default resulting from GST implementation.
3. Now, beginning with the next round of borrowing, Jharkhand will also obtain funds raised through such a window.

All states and Union territories have accepted to go for the Centre’s first choice to resolve the revenue shortfall resulting from the introduction of the Goods and Services Tax (GST) with Jharkhand being the newest state to join the ranks; the government said that on Saturday.

Finance Ministry, in their statement: 

Under the conditions of Option-1, States and Union territories will be provided with a special borrowing window to resolve the shortfall resulting from the implementation of GST and are entitled to obtain unconditional authorization to borrow 0.50 per cent of the final Gross State Domestic Product (GSDP) out of the 2 per cent additional borrowings approved by the government under Aatmanirbhar Abhiyaan.

“That was over and above the Rs.1.1 lakh crore special window. The Government of India has given additional borrowing permission of Rs.1,765 crore to the State Government of Jharkhand (0.50 per cent of Jharkhand’s GSDP) upon receipt of the choice of Option-1,’ the finance ministry stated in a statement.

According to the declaration, the number of additional borrowing permits issued to 28 States as well as the number of funds collected through the special window as well as released so far to States and Union territories is annexed.

What is the unique window for borrowing?

For the states and UTs that prefer Option-1 to borrow the sum of default resulting from GST implementation, the government has set up a special borrowing window. 

Since October 23, 2020, the window has been operational, as well as the government has already lent a sum of Rs30,000 crore in five instalments on behalf of the states and passed it on to the states and UTs that choose Option-1.

Now, beginning with the next round of borrowing, Jharkhand will also obtain funds raised through such a window. On December 7, 2020, the next instalment of Rs 6,000 crore will be allocated to the States and Union territories.