Bangalore: “The government has decided to adopt a GST cess and special lending method to address the shortage of income caused by the unavailability of goods and services tax (GST) compensation,” Chief Minister BS Singh said. Yeddyurappa said.
The central government, which said it could not provide GST relief, had two options before the states. States have been asked to specify which option.
According to Option One, the Cess and the Central Government are the ones who will be given credit through the window. There is also the possibility of borrowing 1 per cent of the total GSDP as a loan. According to Option Two, the amount of GST indemnity amount is Rs. But the remaining amount has to be borrowed in the open market at a higher interest rate.
‘After evaluating these two options, option 1 is considered a priority. This will help boost revenue, ”the chief minister said.
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Under the first option, the state is entitled to a total compensation of ₹ 18,289 crore. Of this, ₹ 6,965 crore comes from cess. The remaining ₹ 11,324 crore has been sanctioned through a special window. The principal and interest will be repaid from the Cess Fund in the future. “We have the opportunity to borrow 1 per cent (₹ 18,036 crore) of additional debt of the state’s Gross Domestic Product (GASDP) without any condition,” he said.
What is the second option ? The state is entitled to a compensation of ₹ 25,508 crore, of which ₹ 6,965 cess. The remaining ₹ 18,543 crore is available for borrowing from the market. However, one per cent of GSDP (₹ 18,036 crore) is required to meet the stipulation. This would reduce the amount of state borrowings to ₹ 10,817 crore. Also, the interest on this loan has to be paid by the state from its resources. Thus, the government has abandoned this option.
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