Punjab opts for borrowing to meet GST receipts shortfall

New Delhi: Punjab government has accepted the central government’s offer for bridging its Goods and Services Tax (GST) revenue gap with debt under a special borrowing window, dropping its earlier opposition to the proposal.

Finance ministry said in a statement on Saturday that Punjab has communicated its decision to meet the revenue shortfall due to implementing GST with debt in the current fiscal. This debt will be serviced using proceeds from the GST compensation cess collected from luxury and sin goods like tobacco, cars and aerated drinks.

With 26 states and three union territories with legislative assemblies—Delhi, Jammu & Kashmir and Pudhcherry—agreeing to the borrowing proposal, one of the most divisive issues to dog the GST Council seems to be heading for a resolution.

Chhattisgarh and Jharkhand are the only states to sign up for the borrowing option. Two other non-BJP ruled states—Kerala and West Bengal earlier this week opted for it.

The Centre has already borrowed Rs.24,000 crore on behalf of states and have passed it on to them. “Now the state of Punjab will also receive funds raised through this window starting from the next round of borrowing,” said the finance ministry.

The borrowing scheme opted by the states covers only the losses that can be attributed to the adoption of GST in 2017. It excludes the GST revenue losses due to the pandemic and the lockdown measures.

However, in order to incentivise states to join the scheme, Centre earlier waived off the reform conditions attached to a part of the extra borrowing allowed to them in May.

Accordingly, Punjab gets permission to raise extra Rs.3,033 crore representing half percentage point of the state’s Gross State Domestic Product (GSDP). This is over and above the funds it is getting as GST compensation.