GST compensation of ₹5k-cr issued for states

91% OF THE TOTAL ESTIMATED GST COMPENSATION SHORTFALL HAS BEEN RELEASED SO FAR TO THE STATES AND UTS WITH LEGISLATIVE ASSEMBLIES

NEW DELHI The Centre on Saturday released the 17th weekly instalment of ₹5,000 crore to the states to meet the Goods and Services Tax (GST) compensation shortfall, the department of expenditure of the finance ministry said in a release.

The chunk of financial aid has been borrowed this week at an interest rate of 5.5924%, the ministry said.

“So far, an amount of ₹1,00,000 crore has been borrowed by the Central Government through the special borrowing window at an average interest rate of 4.8307%,” the release stated.

The previous instalment of ₹6,000 crore was released earlier this week on Monday. Further, additional borrowing permission of over ₹1.06 lakh crore was granted to the states.

Out of the total amount released, ₹4,730.41 crore has been released to 23 states and an amount of ₹269.59 crore has been released to the three union territories (UT) with the Legislative Assembly (Delhi, Jammu and Kashmir and Puducherry) who are members of the GST Council, the statement read.

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

Till now, 91% of the total estimated GST compensation shortfall has been released to the states and UTS with Legislative Assemblies. Out of this, an amount of ₹91,460.34 crore has been released to the states and an amount of ₹8,539.66 crore has been released to Delhi, Jammu and Kashmir and Puducherry.

The government had set up a special borrowing window in October 2020 to meet the estimated shortfall of ₹1.10 lakh crore in revenue arising on account of implementation of GST, the statement read.

“Under the special window, the Government of India has been borrowing in government stock with a tenor of 3 years and 5 years. The borrowing made under each tenor is equally divided among all the states as per their GST compensation shortfall. With the current release, the proportionate pending GST shortfall with respect to borrowing under 5 years tenure has been concluded for 16 states and two UTS. These states and UTS were onboard for GST compensation release from the first Installment,” said the Ministry.

In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the central government has also granted additional borrowing permission equivalent to 0.50 % of Gross States Domestic Product (GSDP) to the states choosing Option-i to meet GST compensation shortfall to help them in mobilising additional financial resources.

“All the states have given their preference for Option-i. Permission for borrowing the entire additional amount of ₹1,06,830 crore (0.50% of GSDP) has been granted to 28 states under this provision,” the ministry said.