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GST compensation: Centre transfers first tranche of Rs 6,000 crore to 16 states

The states and UTs that received the first tranche of GST compensation are Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand, Delhi and Jammu and Kashmir

twitter-logoBusinessToday.In | October 23, 2020 | Updated 20:07 IST
GST compensation: Centre transfers first tranche ofGST compensation: Centre transfers first tranche of Rs 6,000 crore to 16 states Rs 6,000 crore to 16 states
Government intends to make weekly releases of Rs 6,000 crore to the States, says Ministry of Finance

In a bid to bridge the goods and services tax (GST) revenue shortfall, the central government has borrowed and transferred Rs 6,000 crore as the first tranche to 16 states and union territories under a special borrowing window, the Ministry of Finance said on Friday.

The states that received GST compensation are Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand. The two Union Territories (UTs) are Delhi and Jammu and Kashmir. 

As per the finance ministry, the borrowing is fixed at an interest rate of 5.19 per cent. Tenor of borrowing is expected to be broadly in the range of 3 to 5 years.

The government intends to make weekly releases of Rs 6,000 crore to the states, the Finance Ministry also said in a statement.

Also Read: GST compensation: Centre to borrow Rs 1.1 lakh crore to meet shortfall

The ministry said the borrowed amount will be transferred to the states as "back-to-back loan in lieu of GST compensation cess". This borrowing will not have any impact on the fiscal deficit of the government. The amount will be reflected as the capital receipts of the states and as part of financing of its respective fiscal deficits, it said.

On October 15, the central government has announced that it will borrow Rs 1.1 lakh crore under the special window to meet the shortfall of GST compensation. It has evolved a special borrowing window to address the shortfall in the GST collection during the year 2020-2021.

The projected total GST compensation shortfall in the current fiscal stands at Rs 2.35 lakh crore. 

Also read: GST shortfall: Centre permits 21 states to borrow Rs 78,542 crore to meet revenue deficit

As many as 21 states and two union territories have opted for this special window involving back-to-back borrowing coordinated by the Ministry of Finance. However, out of these, five states did not have any shortfall on account of GST compensation. 

The government recently allowed 21 states to raise an additional Rs 78,542 crore through open market borrowings to bridge the revenue shortfall caused by the COVID-19 pandemic.

By Chitranjan Kumar

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