States accept Centre's GST compensation formula to meet revenue shortfall

GST Council meeting
Finance Ministers Nirmala Sitharaman with Minister of State Anurag Thakur chairs the 42nd GST Council meeting via video conferencing in New Delhi, Monday, Oct 5, 2020. File/PTI

New Delhi: All the 28 states and three union territories with legislature have decided to go for the Centre-suggested compensation formula to meet the revenue shortfall arising out of the GST implementation.

Jharkhand, the only remaining state, has now communicated its acceptance of Option-1 given by the Centre.

All the three union territories with Legislative Assembly who are members of the GST council have already decided in favour of Option-1.

The Central government has set up a special borrowing window for the states and union territories who choose Option-1 to borrow the amount of shortfall arising out of GST implementation.

The window has been operationalised since October 23 and the Centre has already borrowed an amount of Rs 30,000 crore on behalf of the states in five instalments and passed it on to the ones who chose Option-1.

Now Jharkhand will also receive funds raised through this window starting from the next round of borrowing.

The next instalment of Rs 6,000 crore will be released on December 7.

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 Centre under the Atma Nirbhar Abhiyaan on May 17.

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