You are here: Home » Economy & Policy » News » GST
Business Standard

GST compensation shortfall: Tamil Nadu becomes 21st state to pick Option 1

Gets nod to borrow Rs 9,600 crore, total additional borrowing touches Rs 78,000 crore

GST compensation | GST Council | GST collection

Dilasha Seth  |  New Delhi 

The additional borrowing for states constitutes 0.5 per cent of their respective gross state domestic product.

Tamil Nadu became the 21st state to pick Option 1 to access additional market borrowing, of Rs 9,627 crore, on Wednesday taking the total borrowing permitted by the Centre to Rs 78,000 crore, over and above the Rs 1.1 trillion special window provided to all states to compensate for inadequate GST cess collection.

The additional borrowing for states constitutes 0.5 per cent of their respective gross state domestic product.

On Tuesday, the Department of Expenditure had permitted 20 states to raise an additional Rs 68,825 crore through the market. “With today’s permission, 21 states have been granted permission to mobilise Rs 78,542 crore so far,” an official release said on Wednesday.

The Rs 1.1 trillion borrowing will be facilitated through a special window by the finance ministry. The framework for this window is being finalised, the ministry said in a statement.


After Tamil Nadu joined 20 other states and Union Territories — Delhi and Puducherry — in picking an option, eight states remain that have not opted for either of the two options offered by the Centre.

Kerala Finance Minister T M Thomas Isaac reacted strongly to the Centre’s policy, saying it was trying to “divide” states. “(I) had repeatedly appealed to the Council to increase unconditional component of additional 2 per cent borrowing permitted, to ensure fiscal space for the states, while negotiations could go on for a new compromise option. Now the Centre uses it for dividing states. Still, the Centre wants a consensus,” he tweeted.

Kerala, Punjab, Chhattisgarh, and West Bengal have rejected both options. They are pressing the Centre to borrow instead, and are exploring legal options to contest Centre’s decision to proceed with its offer despite the not reaching a consensus.

The Centre had put forward two options after the on August 27, both requiring borrowing to be done by states.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, October 15 2020. 00:47 IST