This Article is From Sep 02, 2020

Karnataka Chooses Centre's Option 1 - Will Borrow To Make Up For GST Loss

After the GST Council meeting last week, the central government had offered two borrowing options to states to make up for the expected GST revenue shortfall of Rs 2.35 lakh crore in this fiscal.

Karnataka Chooses Centre's Option 1 - Will Borrow To Make Up For GST Loss

Decision taken by Chief Minister BS Yediyurappa, who is also the Finance Minister of BJP-ruled Karnataka.

Bengaluru:

The BJP-ruled Karnataka today said it has decided to opt for the first among the two options offered by the Central government for borrowing to meet the shortfall in GST revenues, under which the state will be eligible for a total compensation of Rs 18,289 crore.

The decision was taken by Chief Minister BS Yediyurappa, who also holds the finance portfolio, after a meeting with Finance officials.

Following the GST council meeting last week, the central government had written to states, suggesting options of borrowing money to make up for the Rs 2.35 lakh crore shortfall in GST revenues expected in the ongoing fiscal. The Centre has estimated that of this amount, Rs 97,000 crore compensation requirement is due to GST roll out and the remaining is on account of the COVID-19 impact on the economy.

Giving two options, the Centre had said states can borrow either Rs 97,000 crore the deficit arising out of GST implementation or the entire Rs 2.35 lakh crore.

Several non-BJP ruled states have rejected the Centre's suggestion of states borrowing to make up for the GST shortfall, saying the constitutional liability lies with the Union government.

"After the evaluating both these options, it is felt that option 1 would be more beneficial to the state's finances," official release from the Chief Minister's Office said.

The Chief Minister's Office noted that under option 1, Karnataka would be eligible for total compensation of Rs 18,289 crore, of which Rs 6,965 crore would come from the cess collected. For the balance of Rs 11,324 crore, the state would be able to borrow through a special window with the burden of principal and interest repayment being met out of compensation cess fund in the future, it said.

"Further an additional borrowing up to 1 per cent of GSDP (Rs 18,036 crore) will be available unconditionally and another 1 percent borrowing can be linked to certain reforms as earlier suggested by Government of India," it said.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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