GST Compensation Shortfall: Twenty States allowed to mobilize Rs.68,825 cr

GST Compensation Shortfall: Twenty States allowed to mobilize Rs.68,825 cr

GST - GST Compensation - GST Compensation Shortfall - Taxscan

The Department of Expenditure, Ministry of Finance, has today granted permission to 20 States to raise an additional amount of Rs.68,825 crore through open market borrowings. 

Additional borrowing permission has been granted @ 0.50 % of the Gross State Domestic Product (GSDP) to those States who have opted for Option- 1 out of the two options suggested by the Ministry of Finance to meet the shortfall arising out of GST implementation. 

In the meeting of the GST Council held on 27th August 2020, these two options were put forward and were subsequently communicated to the States on 29th August, 2020.  Twenty States have given their preferences for Option-1.  These states are – Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh, and Uttarakhand.  Eight States are yet to exercise an option.

Facilities available to the States who choose Option-1 inter-alia include:

  1. A special borrowing window, coordinated by the to borrow the amount of shortfall in revenue through the issue of debt. The total shortfall in the revenue of the States on this account has been estimated at around Rs 1.1 lakh crore.
  2. Permission to borrow the final installment of 0.5% of GSDP out of the 2% additional borrowings permitted by the Government of India in view of the COVID pandemic, waiving the reforms condition.

The Department of Expenditure, on 17th May 2020, had provided an additional borrowing limit of upto 2% of GSDP to the States. The final installment of 0.5% out of this 2% limit was linked to carrying out at least three out of four reforms stipulated by the Government of India. However, in the case of States who have exercised Option-1, to meet the shortfall arising out of GST implementation, the condition of carrying out the reforms to avail the final installment of 0.5% of GSDP has been waived.  Thus, the 20 States, who have exercised Option-1, have become eligible to raise an amount of Rs 68,825 crore through open market borrowings. Action on the special borrowing window is being taken separately.

State-wise details are follows:

S. No.StateAdditional borrowing allowed on 13.10.2020 (Rs in crore)
1Andhra Pradesh5,051.00
2Arunachal Pradesh143.00
6Gujarat 8,704.00
8Himachal Pradesh 877.00
10Madhya Pradesh4,746.00
17Sikkim     156.00
19Uttar Pradesh9,703.00


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