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Tamil Nadu chooses option 1 for GST compensation alongside of 20 States
Tamil Nadu chooses option 1 for GST compensation alongside of 20 States

The Centre has proposed two options to settle GST dues to the state and the state can choose whichever they think is feasible for them. The Tamil Nadu government has agreed to go for option 1, as proposed by the Centre for settlement of GST dues and according to option 1 the TN government is mobilizing Rs 9,627 crore through open market borrowings to fill the revenue shortfall caused by the Covid -19 pandemic.

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The Union Ministry of Finance has given the permission, “The permission was issued after Tamil Nadu formally communicated its acceptance for Option 1 to meet the shortfall arising out of GST implementation”. The Centre had given the States and UTs two options in the month of August either to borrow Rs 97,000 crore from a special window facilitated by the RBI or borrow a total Rs 2.35 lakh crore from the market. Till date 21 States and two Union Territories, Delhi and Jammu & Kashmir opted for Option 1. It had said that GST revenue shortfall stood at Rs 2.35 crore this year, out of which Rs 97,000 crore was owing to GST implementation and rest, due to Covid.

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Recently, Tamil Nadu has now joined the 20 other States that have agreed to Option 1 of the Centre’s borrowing plan, according to which a special borrowing window of Rs 1.10 lakh crore and rest of Rs 1.25 lakh crore via open market borrowing can be made. This extra spending allowed to the States is above Rs 1.10 lakh crore. Together, these 21 States will borrow an additional sum of Rs 78,452 crore. The normal limit for borrowing is 3 per cent of the GSDP.

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