The central government has given its nod to 20 States to raise an additional amount of Rs 68,825 crore through open market borrowings, Finance Ministry said on Tuesday.

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The additional borrowing of 0.5 percent of the GSDP has been given to states which have agreed for GST borrowing under the first option of Rs 1.10 lakh crore.

These 20 States are - Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand.

The Ministry also said that eight states have yet to exercise a borrowing option to meet the GST shortfall.

Facilities available to states which have opted for option 1 include, “A special borrowing window, coordinated by the Ministry of Finance to borrow the amount of shortfall in revenue through issue of debt. The total shortfall in the revenue of the States on this account has been estimated at around Rs 1.1 lakh crore.”

The Rs 68,825 crore of additional state borrowing is a sop to encourage states to borrow under the Rs 1.10 lakh crore option for GST shortfall. The 20 states which opted for this have been consequently allowed to borrow more than their normal limits.

Finance ministry also said, “Action on the special borrowing window is being taken separately”.

Government officials told CNBCTV18 that the Centre, in consultation with RBI, will work out the details of the GST borrowing scheme and notify it soon.

The Centre has also indicated that the tenor of the GST compensation bonds will not be long and hence the Centre may not need to set aside a subsidy, to help states on the interest rate differential between the state paper and government securities, as was indicated earlier.

The Centre has also clarified that the GST cess will remain extended till all the compensation dues of all the states are paid.

Officials also said that states which choose not to borrow will continue to be paid from collections in the compensation cess fund. The arrears will be settled after July 2022, once the interest and principal for the GST borrowing are settled from the compensation fund.

Further, the GST Council’s jurisdiction does not extend to allowing or disallowing state borrowing, a subject which is dealt with by the finance ministry under Article 293 of the Constitution, officials added.

'Lack of consensus in the GST Council does not mean other states will be held ransom", a senior official said.

(Edited by : Ankit Gohel)

First Published:Oct 14, 2020 7:31 AM IST