Centre releases Rs 6,000 cr to states as GST compensation

Till now, 70% of the total estimated Goods and Services Tax compensation shortfall has been released to the states

The Union Finance Ministry on Friday said it has released the 13th weekly instalment of Rs 6,000 crore to 23 states and three Union Territories (UTs) to meet the GST compensation shortfall. Out of this, an amount of Rs 5,516.60 crore has been released to 23 states, and an amount of Rs 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council.

The remaining five states Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation, the Finance Ministry said in a statement. Till now, 70 per cent of the total estimated Goods and Services Tax (GST) compensation shortfall has been released to the States & UTs with Legislative Assembly. Out of this, an amount of Rs 71,099.56 crore has been released to the states and an amount of Rs 6,900.44 crore has been released to the 3 UTs with Legislative Assembly, the ministry said.

The Government of India had set up a special borrowing window in October 2020 to meet the estimated shortfall of Rs 1.10 lakh crore in revenue arising on account of implementation of GST. The borrowings are being done through this window by the Government of India on behalf of the States and UTs. 13 rounds of borrowings have been completed so far starting from 23rd October, 2020. "The amount released this week was the 13th instalment of such funds provided to the states. The amount has been borrowed this week at an interest rate of 5.3083 per cent. So far, an amount of Rs 78,000 crore has been borrowed by the Central Government through the special borrowing window at an average interest rate of 4.7491 per cent," the Finance Ministry said.

In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the Government of India has also granted additional borrowing permission equivalent to 0.50 per cent 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 Rs 1,06,830 crore (0.50 per cent of GSDP) has been granted to 28 states under this provision.