NEW DELHI/CHENNAI: Two days after the Tamil Nadu government agreed to go for option 1, as proposed by the Centre for settlement of GST dues, it has formalised its decision to mobilise Rs 9,627 crore through open market borrowings to bridge the revenue shortfall caused by the Covid -19 pandemic.
According to an official statement issued by the Union Ministry of Finance, “The permission was issued after Tamil Nadu formally communicated its acceptance for Option 1 to meet the shortfall arising out of GST implementation.
As many as 21 States and two Union Territories — Delhi and Jammu & Kashmir — have so far requested for Option 1.” The Centre had given the States two options in August — to borrow Rs 97,000 crore from a special window facilitated by the RBI or borrow a total Rs 2.35 lakh crore from the market.
It had said that GST revenue shortfall stood at Rs 2.35 crore this year, out of which Rs 97,000 crore was owing to GST implementation and rest, due to Covid. Tamil Nadu has now joined 20 other States that have agreed to the Centre’s borrowing plan, which offers a special borrowing window of Rs 1.10 lakh crore and rest of Rs 1.25 lakh crore via open market borrowing. This extra spending allowed to the States is above Rs 1.10 lakh crore. Together, these 21 States will borrow an additional sum of Rs 78,452 crore.
‘Centre hiked normal limit for borrowing by 1%’
A senior State government official said, “In the last two meetings of the GST Council held on October 5 and 12, TN had agreed upon choosing Option 1. The decision was formally communicated to the Centre on Tuesday, and Centre announced that we can draw this amount through borrowings on Wednesday. The normal limit for borrowing is 3 per cent of the GSDP.
Now, the Centre has allowed one more per cent. The remaining one per cent will be achieved if we fulfil the reform conditions. In addition, we will be getting Rs 6,000 crore for borrowing under the special dispensation,” the official added. At the 42nd GST council meet earlier this month, the amount of Rs 97,000 crore was increased to Rs 1.10 lakh crore. It had also proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing.