All States choose Option-1 to meet the GST implementation shortfall

• Jharkhand has become the latest State to go for Option-1
• Jharkhand will get Rs. 1,689 crore through special borrowing window to meet the GST implementation shortfall
• Permission to raise additional Rs. 1,765 crore through borrowings also issued to Jharkhand

All the 28 States and 3 Union Territories with legislature have decided to go for Option-1 to meet the revenue shortfall arising out of the GST implementation. Jharkhand, the only remaining State, has now communicated its acceptance of Option-1. All the 3 Union Territories with Legislative Assembly who are members of the GST council have already decided in favour of Option-1. 

The Government of India has set up a special borrowing window for the States & Union Territories who choose Option-1 to borrow the amount of shortfall arising out of GST implementation. The window has been operationalised since 23^rd October, 2020 and the Government of India has already borrowed an amount of Rs.30,000 crore on behalf of the States in five instalments and passed it on to the States and Union Territories, who chose Option-1.

Now the State of 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 to the States/UTs on 7^th December, 2020.

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% of Gross State Domestic Product (GSDP) out of the 2% additional borrowings permitted by the Government of India, under Atma Nirbhar Abhiyaan on 17^th May, 2020. This is over and above the Special Window of Rs.1.1 lakh crore.

On receipt of the choice of Option-1, the Government of India has granted additional borrowing permission of Rs.1,765 crore to the State Government of Jharkhand (0.50 % of Jharkhand’s GSDP).

The amount of additional borrowing permission granted to 28 States and the amount of funds raised through special window and released to the States and Union Territories so far is annexed.

State wise additional borrowing of 0.50 percent of GSDP allowed and amount of funds raised through special window passed on to the States/UTs till 04.12.2020

(Rs. in Crore)

* These States have ‘NIL’ GST compensation gap

# Funds will be released starting after next round of borrowing.

Source: Press Release

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TW Editorial Team comprises of team of experienced Chartered Accountants and Advocates devoted to spread the knowledge of GST amongst the various stakeholders.