West Bengal, Kerala to go for ‘Option 1’ to meet GST compensation shortfall

Our Bureau New Delhi | Updated on November 25, 2020 Published on November 25, 2020

Finally, West Bengal and Kerala agreed to join 23 States and 3 Union Territories with the legislature to go for ‘Option 1’ for meeting GST compensation cess shortfall. Now only, Punjab, Jharkhand and Chattisgarh have to take a call.

The States and Union Territories that choose Option 1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Central government. The window has been operationalised since October 23. The Centre has already borrowed an amount of ₹24,000 crore on behalf of the States in four instalments and passed it on to the States and Union Territories that chose Option 1. Now, Kerala and West Bengal will also receive funds raised through this window starting from the next round of borrowings.

Terms of Option 1

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 0.5 per cent of Gross State Domestic Product (GSDP) out of the 2 per cent additional borrowings permitted by the Centre, under Atmnirbhar Abhiyaan on May 17. This is over and above the Special Window of Rs.1.1 lakh crore.

On receipt of the choice of Option-1 from Kerala and West Bengal, the Centre has granted additional borrowing permission of ₹4,522 crore to Kerala (0.5 per cent of Kerala’s GSDP) and ₹6,787 crore to West Bengal (0.5 per cent of West Bengal’s GSDP).



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Published on November 25, 2020
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