Kerala, West Bengal take borrowing option to meet GST compensation shortfall

Kerala and West Bengal became the latest states to choose Rs 1.1 lakh crore option to meet the shortfall from goods and service tax (GST) implementation, and will get Rs 10,197 crore through special borrowing window.

The finance ministry said Wednesday that on receipt of the choice from both states, Centre has granted additional borrowing permission of Rs 4,522 crore to Kerala and Rs 6,787 crore to West Bengal, which is 0.5% of the their respective gross state domestic products (GSDP).

West Bengal finance minister Amit Mitra had written to Union finance minister Nirmala Sitharaman on November 13 stating that the state will take the borrowing option due to acute fiscal stress on the state’s finances but asked that the Centre also borrows the remaining one-third of the potential shortfall of Rs 72,000 crore.

With the two states, the total number of states having chosen the Option 1 for meeting GST compensation shortfall goes up to 25.


The Centre had offered to all states two options – Rs 97,000 crore and Rs 2.35 lakh crore – with different set of conditions for each to meet the GST compensation shortfall. The Centre sweetened the first option by increasing the borrowing limit to Rs 1.1 lakh crore and agreed to borrow the amount and transfer to the states as loans on a back to back basis.

Last month, 21 states and two union territories had taken the first option and the Centre had started issuing the funds in weekly tranches through a special window coordinated by the finance ministry.

“The window has been operationalised since 23rd October, 2020 and the government of India has already borrowed an amount of Rs 24,000 crore on behalf of the states in four instalments,” the finance ministry said.

Among the states that had initially rejected both options, only Chhattisgarh and Punjab are left, that have not decided to accept either of the options.

The amount of additional borrowing permission granted to 25 states and the amount of funds raised through special window and released to 23 states and three union territories so far, stands at Rs 1,00,240 crore and Rs 24,000 crore, respectively.

Kerala, West Bengal take borrowing option to meet GST compensation shortfall Kerala, West Bengal take borrowing option to meet GST compensation shortfall Reviewed by TechCO on 11/27/2020 Rating: 5

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