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Centre releases 10th installment to states to meet GST compensation shortfall


The Centre has released the tenth instalment of Rs 6,000 crore to states as back-to-back loan to meet the goods and services tax (GST) compensation shortfall, taking the total amount released so far through the special borrowing window to Rs 60,000 crore, the finance ministry said on Monday.


Of this, an amount of Rs 5,516.60 crore has been released to 23 states and Rs 483.40 crore to Delhi and the union territories of Jammu & Kashmir and Puducherry.


The remaining five states—Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim—do not have a gap in revenue on account of GST implementation.


“Now, more than 50 percent of the estimated GST compensation shortfall has been released to the States & UT with Legislative Assembly,” the ministry said.


The amount has been borrowed this week at an interest rate of 4.1526%, while the average interest rate was 4.6892%.


An additional borrowing permission of Rs 1,06,830 crore has been granted to states, it added, equivalent to 0.5% of states’ gross domestic product.


All states have now taken the Rs 1.1 lakh crore option where Centre will borrow the amount and transfer to the states as loans on a back-to-back basis.


The Centre had put two options of borrowing—Rs 97,000 crore and Rs 2.35 lakh crore—with different sets of conditions, for each to meet the GST compensation shortfall. The Centre sweetened the first option by increasing the borrowing to Rs 1.1 lakh crore. The second option was taken off the table as no state showed interest in it.


Some states had initially declined to take any of the options but later chose the first option. The Centre had set up a special borrowing window in October, 2020 to meet the estimated shortfall arising on account of implementation of GST.

Centre releases 10th installment to states to meet GST compensation shortfall Centre releases 10th installment to states to meet GST compensation shortfall Reviewed by TechCO on 1/05/2021 Rating: 5

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