Punjab chooses Option-1 to meet GST implementation shortfall

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SME Times News Bureau | 28 Nov, 2020
Another opposition-ruled state Punjab has now communicated acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation.

The states earlier had voiced its concern on the method the Centre was proposing to settle GST compensation dues of states. It wanted the central government to bear the entire compensation shortfall as per GST legislation.

With Punjab now joining the Centre's proposed formula, the number of states who have chosen this option has gone up to 26.

All the three Union Territories with Legislative Assembly (i.e. Delhi, Jammu & Kashmir and Puducherry) have also decided in favour of Option-1.

The States & Union Territories who choose Option-1 will get the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Centre.

The window has been operationalised since October 23, 2020, and the Government of India has already borrowed an amount of Rs 24,000 crore on behalf of the States in four instalments and passed it on to the States and Union Territories, who chose Option-1 on October 23, November 2, November 9, and November 23.

Now the State of Punjab will also receive funds raised through this window starting from the next round of borrowing.

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

On receipt of the choice of Option-1 from the Government of Punjab, the Government of India has granted additional borrowing permission of Rs 3,033 crore to the State Government of Punjab(0.5 per cent of Punjab's GSDP).