Chhattisgarh accepts GST recompense formula

Chhattisgarh Chief Minister Bhupesh Baghel. File   | Photo Credit: R.V. Moorthy

Chhattisgarh has accepted the alternative offered by the Centre to meet the GST compensation shortfall for States through a special borrowing window, the Finance Ministry said on Thursday. Jharkhand is now the only State yet to decide on the matter.

With Chhattisgarh’s acquiescence to the Centre’s formulation to resolve the GST compensation with States, all States, barring Jharkhand, and all union territories have now come on board. “The number of States that have favoured Option-1 has gone up to 27,” the Finance Ministry said.

Under Option-1, States could borrow ₹1.1 lakh crore out of the estimated ₹ 2.35 lakh crore shortfall in compensation dues this year. After initially asking States to undertake the borrowings themselves, the Centre had later offered to borrow on States’ behalf and lend it onwards.

Under Option 2, States could borrow the entire compensation shortfall through the issue of market debt.

Over the past week, most of the States that had reservations with the Centre’s arrangement, including Kerala, West Bengal and Punjab, have communicated their acceptance of Option-1.

Chhattisgarh will get ₹3,109 crore through the special borrowing window and has been permitted to borrow an additional ₹1,792 crore. So far, ₹30,000 crore has been raised in five instalments through the special borrowing window that was operationalised in late October.

“Chhattisgarh will also receive funds raised through this window starting from the next round of borrowing,” the Ministry said.

All repayments for these special borrowings will be paid from future collections of GST cess, whose validity has been extended beyond the originally envisaged sunset date of June 2022.

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Printable version | Jan 16, 2021 6:20:30 AM |

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