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Nov 26, 2020
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GST compensation: Bengal, Kerala too pick option mooted by Centre
The state governments of West Bengal and Kerala, which have been at loggerheads with the Centre over how to compensate the states for their GST revenue shortfall in FY21, given the paucity of the designated cess funds, also have accepted Option-1 mooted by the latter to meet the shortfall.
With this, 25 states and all three UTs with legislature — Delhi, J&K and Puducherry — have come to accept the Option-1.
Under the mechanism, the Centre envisages to borrow a total of Rs 1.1 lakh crore via a special RBI window and transfer the funds to states as back-to-back loans sans any consequent fiscal impact on states.
Between them, West Bengal and Kerala will get Rs 10,197 crore under the special window. Further, the Centre has granted additional borrowing permission of Rs 4,522 crore to Kerala (0.5% of GSDP) and Rs 6,787 crore to West Bengal. The nod for additional borrowings is meant to be an incentive for states choosing the special window.
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