Option-1 has been chosen by the governments of Kerala and West Bengal, and they have communicated their choice to meet the revenue shortfall arising out of GST implementation. The number of States who have chosen this option has now gone up to 25. All the three Union Territories with Legislative Assembly (i.e. Delhi, Jammu & Kashmir and Puducherry) have also decided in favour of Option-1.

States & Union Territories who choose Option-1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the GOI. States of Kerala and West Bengal will now receive funds raised through this window starting from the next round of borrowings.

This window has been operationalised since October 23, 2020 and the GOI has already borrowed an amount of Rs 24,000 crore on behalf of the States in four installments and passed it on to the States and Union Territories, who chose Option -1 on October 23 2020, November 2, 2020, November 9, 2020 and November 23 2020.

States are also entitled to get unconditional permission to borrow the final installment of 0.50% of Gross State Domestic Product (GSDP) out of the 2% additional borrowings permitted by the GOI, under Atmnirbhar Abhiyaan under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation.

This is over and above the Special Window of Rs 1.1 lakh crore.  On receipt of the choice of Option-1 from the Governments of Kerala and West Bengal, the GOI has granted additional borrowing permission of Rs 4,522 crore to the State Government of Kerala (0.5% of Kerala’s GSDP) and Rs.6,787 crore to the State Government of West Bengal (0.5% of West Bengal’s GSDP).

It must be underscored that earlier this month, the Finance Ministry has said that it will transfer Rs 6,000 crore as the second tranche of GST compensation shortfall to 16 states and three Union Territories including Maharashtra, Bihar, Assam, Puducherry, and Delhi.