Barring Jharkhand, all states join Centre's GST formula

New Delhi: With Chhattisgarh communicating its acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation, all the states barring Jharkhand have joined the Centre's suggested formula on compensation settlement. The number of states who have favoured Option-1 has gone up to 27.

All states except Jharkhand and all the 3 union territories with Legislative Assembly have decided in favour of Option-1. The states & union territories who choose Option-1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Government of India. The window has been operationalised since October 23, 2020 and the government 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.

The funds borrowed through the special window were released to the states and UTs on October 23, 2020, November 2, 2020, November 9, 2020, November 23, 2020 and December 1, 2020. Now, Chhattisgarh will also receive funds raised through this window starting from the next round of borrowing.

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, the states are also entitled to get unconditional permission to borrow the final instalment of 0.50 per cent of Gross State Domestic Product (GSDP) out of the 2 per cent additional borrowings permitted by the government, under AtmanirbharAbhiyaan on May 17, 2020. This is over and above the Special Window of Rs 1.1 lakh crore.

On receipt of the choice of Option-1, the government has granted additional borrowing permission of Rs 1,792 crore to the state government of Chhattisgarh (0.50 per cent of Chhattisgarh's GSDP).