Punjab accepts Centre’s borrowing option to meet GST shortfall

Punjab on Saturday accepted one of many Centre’s choices to satisfy the income shortfall within the Goods and Services Tax (GST) and borrow Rs 97,000 crore at cheap rates of interest from a particular window to be opened in session with the Reserve Bank of India (RBI). Punjab is among the many 26 states and Union territories, together with Delhi, Jammu & Kashmir and Puducherry, to just accept Option 1 to satisfy the income shortfall, in keeping with the Union ministry of finance.

The Constitution (One Hundred and First Amendment) Act, 2016, which launched the GST has a provision for compensating states for the losses arising out of the implementation of the tax regime, from a GST Compensation Fund. For the fiscal 12 months 2020-21, the income shortfall has been anticipated to be at Rs Three lakh crore, with the Compensation Fund anticipated to own solely about Rs 65,000 crore.

While asserting that the GST Council and never the Union authorities is liable for compensating the shortfalls, the federal government has requested states to borrow from the market underneath a particular borrowing window. Both the principal and the curiosity funds will come from cess collections. In the second choice, the states can borrow the complete Rs 2.35 lakh crore however should bear the curiosity value.

Under the primary choice, apart from getting the power of a particular window for borrowings to satisfy the shortfall, states are additionally entitled to get unconditional permission to borrow the ultimate instalment of 0.50 per cent of Gross State Domestic Product (GSDP) out of the two% further borrowings permitted by the Centre, underneath the Aatmanirbhar Abhiyan on May 17, 2020. The window has been in operation since October, 23 and the Centre has already borrowed an quantity of Rs 24,000 crore on behalf of the states in 4 instalments and handed it onto the states and Union Territories, who selected Option-1 on October 23, November 2, November 9 and November 23.

In tune with this, Punjab has been granted further borrowing permission of Rs 3,033 crore in opposition to 0.5% of the northern state’s GSDP by the Centre. Under this present borrowing plan, the Centre borrows Rs 1.10 lakh crore from the market, which is the income shortfall on account of GST implementation. The remaining Rs 73,000 crore shortfall is estimated to be the income affect of the Covid-19 pandemic. The second choice given by the Centre was for the states to borrow the complete Rs 1.83 lakh crore assortment shortfall. Which Punjab was earlier in favour of, as reported by information company PTI.

Under Option 2, the States can promote debt available in the market to boost the complete Rs 2.35 lakh crore shortfall however with the phrases of the borrowing being far much less beneficial. Crucially, right here the curiosity value must be borne by them with solely the principal being serviced by the Compensation Fund.

Punjab joins the likes of Kerala and West Bengal, who after refusing to go for Option 1, accepted the Centre’s proposal on November 23. The different states which have opted for Option 1 are Arunachal Pradesh, Bihar, Andhra Pradesh, Goa, Himachal Pradesh, Karnataka, Haryana, Maharashtra, Gujarat, Manipur, Uttar Pradesh, Meghalaya, Odisha, Mizoram, Assam, Nagaland, Rajasthan, Sikkim, Tripura, Madhya Pradesh, Tamil Nadu, Telangana, Uttarakhand, West Bengal, and Kerala, together with the Union Territories of Delhi, Jammu and Kashmir, and Puducherry.