Finance ministry releases 10th instalment of GST compensation to states

The Finance Ministry on Monday released the tenth weekly instalment of Rs 6,000 crore to the states to meet the Goods and Services Tax (GST) compensation shortfall.

The Finance Ministry said in a release that out of this amount, a sum 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 three Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir and Puducherry) which are members of the GST Council.

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

Now, more than 50 per cent of the estimated GST compensation shortfall has been released to the states and UT with Legislative Assembly, the government 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.

The borrowings have been done in 10 rounds from October 23 till now.

According to the government, the amount has been borrowed this week at an interest rate of 4.1526 per cent. So far, an amount of Rs 60,000 crore has been borrowed by the central government through the special borrowing window at an average interest rate of 4.6892 per cent.

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 State 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.