Shedding its resistance, Kerala has joined 24 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.
Kerala, which was in the forefront of the fight for realising the mounting GST compensation cess, has communicated the acceptance of Option I of the GST borrowing proposal.
Along with Kerala, Bengal has also accepted Option I taking the number of States choosing the option to 25.
The amount of shortfall arising out of GST implementation, which has been pegged at ₹1.1 lakh crore, will come through a special borrowing window put in place by the Centre.
Since October 23, the Centre has borrowed ₹24,000 crore on behalf of the States in four instalments and passed it on to 23 States and three Union Territories that chose Option I. The instalments were given on October 23, November 2, 9, and 23.
By accepting Option I, Kerala will also receive funds raised through this window starting from the next round of borrowings. Besides getting the facility of a special window for borrowings to meet the shortfall, the States are also entitled to unconditional permission to borrow the final instalment of 0.5% of Gross State Domestic Product out of the 2% additional borrowings permitted under Atmanirbhar Abhiyaan on May 17. This is over and above the special window of ₹1.1 lakh crore.
The Centre has granted additional borrowing permission of ₹4,522 crore to Kerala (0.5 % of State’s GSDP), according to the Finance Ministry. With this, the State will have nil GST revenue shortfall.
Kerala had anticipated ₹9,006 crore as GST compensation till January 2021 as per the Centre’s decision to borrow through a special window and provide back-to-back loans to the States. Of the anticipated amount, ₹5,767 crore is from the Centre’s offer to borrow and the remaining ₹3,239 crore from the GST cess this year as per the projections made by the Finance Department for April 2020-January 2021.
This will be a relief for the State that is reeling under a financial crisis. Kerala, which led the States to oppose the Centre’s twin options, is of the view that the total shortfall in collection of GST estimated at ₹2.35 lakh crore should be provided this year itself.
