Punjab agrees to Centre’s borrowing formula on GST

Now only Jharkhand and Chhattisgarh are left to opt for the plan

NEW DELHI: Shedding its resistance, Punjab has become the latest state to join 25 other states and three Union Territories in accepting ‘Option I’ put forward by the Centre for meeting the Goods and Service Tax (GST) compensation cess shortfall. The Amarinder Singh-led state will get `8,359 crore through the `1.1 lakh crore borrowing option to meet the GST implementation shortfall.

“The government of Punjab has communicated the acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation. The number of states who have chosen this option has gone up to 26,” the finance ministry said in a statement issued on Saturday. This leaves only Chhattisgarh and Jharkhand as the odd ones who are yet to opt for the borrowing plan proposed by the Centre. Sources in the finance ministry said these two states are also likely to follow suit. So far, all the dissenting states, including Kerala and West Bengal, as well as the three union territories (Delhi, Jammu & Kashmir and Puducherry) have succumbed to pressure by the Centre due to paucity of funds on account of falling state revenue.

The Union government has already borrowed Rs 24,000 crore on behalf of states in four instalments and passed it on to 23 states and Union Territories that have opted for this window on October 23, November 2, November 9 and November 23. Besides this window, states are also entitled to get unconditional permission to borrow up to 0.5 per cent of their respective gross state domestic product under the terms of option 1.

However, this permission is reserved for those already signed up. Kerala has been given permission to borrow `4,522 crore and West Bengal `6,787 crore from the markets. Punjab has also been granted additional borrowing permission of `3,033 crore, the finance ministry said. Similar permission will be extended to the remaining two states once they formally send in their assent in writing. Overall, the Centre had estimated the total GST shortfall this year to be at `2.35 lakh crore. Only `1.1 lakh crore of this was due to GST, while the rest due to Covid-induced disruption.

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