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GST compensation: Centre to transfer second tranche of Rs 6,000 crore to states, UTs

The Ministry of Finance, on October 23, had transferred the first tranche of Rs 6,000 crore to 16 States and 3 Union Territories for meeting their GST compensation cess shortfall under a special borrowing window

twitter-logoBusinessToday.In | November 2, 2020 | Updated 17:28 IST
GST compensation: Centre to transfer second tranche of Rs 6,000 crore to states, UTs
Ministry of Finance to release Rs 6,000 crore as second tranche to States for meeting the GST compensation cess shortfall

The Ministry of Finance on Monday said it will be releasing an amount of Rs 6,000 crore as second tranche to 16 States and 3 union territories (UTs) today for meeting their GST compensation cess shortfall under a special borrowing window. The ministry, on October 23, had transferred the first tranche of Rs 6,000 crore to these states and UTs to bridge the Goods and Services Tax (GST) revenue shortfall. With this, the government has facilitated total loans of Rs 12,000 crore till date under the special window programme.

The Finance Ministry said that the amount was raised at a weighted average yield of 4.42 per cent. "This amount will be passed on to the states/UTs at the same interest rate, which is lower than the cost of borrowings for the states and UTs, thus benefitting them," the FinMin said.

Last week, the government had announced that it intends to make weekly releases of Rs 6,000 crore to the states.

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

The FinMin 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.

The states that have 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 same has been handed over to two union territories (UTs), including Delhi and Jammu and Kashmir.

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

Till date, as many as 21 states and 3 UTs have opted for this special window involving back-to-back borrowing coordinated by the Ministry of Finance.

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

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

Centre 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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