GST Compensation: Centre Borrows, Transfers First Tranche Of Rs 6,000 Crore To 16 States, Two UTs
GST Compensation: Centre Borrows, Transfers First Tranche Of Rs 6,000 Crore To 16 States, Two UTsFinance Minister Nirmala Sitharaman

The Central government has begun the process of market borrowing to address the shortfall in the Goods and Services Tax (GST) collection during the year 2020 – 2021.

The Ministry of Finance on Friday (23 October) said that the government has borrowed and transferred Rs 6,000 crore to 16 states and two union territories.

The ministry said that it had evolved a special borrowing window to meet the compensation deficit under the GST regime. It added that 21 states and 2 union territories had opted for this special window involving back-to-back borrowing.

"Out of these, five states did not have any shortfall on account of GST compensation," the Finance Ministry said in a statement.

“Today, the central government borrowed and transferred Rs 6,000 crore as first tranche to 16 states namely Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand and two union territories: UT of Delhi and UT of Jammu and Kashmir,” the ministry said.

The borrowing has been done at an interest rate of 5.19 per cent, implying the same rate for states in the back-to-back loan arrangement. Tenor of the borrowing is expected to be broadly in the range of 3 to 5 years, it said.

The ministry intends to release Rs 6,000 crore to the states every week.

It should be noted that the Finance Ministry had last week said that the Centre would borrow from the market and then act as an intermediary to arrange back-to-back loans to pay the GST compensation shortfall of Rs 1.1 lakh crore to state governments. This arrangement will not reflect in the fiscal deficit of the Centre and will appear as capital receipts for state governments, reports Indian Express.

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber